MODERN  ECONOMIC 
TENDENCIES 


SIDNEY  A.  REEVE 


MODERN  ECONOMIC 
TENDENCIES 


MODERN  ECONOMIC 
TENDENCIES 

An  Economic  History  of  America 


BY 

SIDNEY  A.   REEVE 


NEW  YORK 
E.  P.  BUTTON  &  COMPANY 

681  FIFTH  AVENUE 


COPYRIGHT,  1921,  BY 
E.  P.  DUTTON  &  CO. 


All  Rightt  Reserved 

I 


Printed  in  the  United  Staffs  of  America, 


TO  THE  MEMORY  OP 


i 


PREFACE 

IN  a  work  portraying  economic  evolution  from  a  time  genera- 
tions in  the  past  down  to  the  latest  practicable  moment,  in 
order  to  form  a  basis  as  accurate  as  possible  for  predicting  the 
future,  it  is  important  to  know  the  date  of  actual  writing.  The 
procession  of  events  during  the  last  six  years  has  altered  so 
drastically,  and  has  transformed  so  many  times,  the  complexion 
of  public  opinion,  that  words  must  be  interpreted  in  the  light  of 
the  date  of  their  utterance. 

This  book  was  begun  in  the  winter  of  1912-13,  as  soon  as  the 
data  from  the  census  of  1910  had  become  available,  and  some 
portions  remain  unchanged  since  then.  On  the  other  hand,  some 
statistical  features  have  been  brought  down  to  the  fall  of  1917, 
with  views  in  the  text  to  correspond.  During  1918  and  1919 
the  diction  of  the  entire  book  was  revised,  and  in  the  latter  year 
the  order  of  chapters  was  shifted.  Occasional  foot-notes  or 
paragraphs  were  added  which  carry  with  them  evidence  of  their 
later  date.  But,  since  it  was  manifestly  impossible  to  bring  the 
entire  book  into  consistency  with  the  viewpoint  of  these  later 
years,  unless  it  were  to  be  entirely  rewritten,  care  was  taken  to 
preserve  all  of  the  sentiments  of  the  book  in  substance  as  they 
had  been  written  in  1917  or  before. 

The  subdivision  of  the  book  into  four  Parts,  namely,  Back- 
ground, Economic  Principles,  Data  and  Social  Reactions,  was 
an  afterthought.  Each  of  these  four  parts  comprise  references 
to  all  four  of  these  topics. 

In  essential,  the  structure  of  the  book  remains  that  of  a  history 
of  American  economic  evolution  from  early  in  the  nineteenth 
century  down  to  the  entrance  of  this  country  into  the  Great 
War  of  1914.  As  to  the  huge  economic  changes  wrought  by  the 
war  itself,  then  not  only  unfinished  but  regarded  by  many  as 
hanging  precariously  in  balance,  barely  an  attempt  at  their  in- 
clusion has  been  made.  The  still  more  significant  changes 
which  have  occurred  since  the  armistice  of  November,  1918,  are 

vii 


Vlll  PREFACE 

represented  only  as  sheer  predictions,  made  from  the  basis 
created  by  the  book  for  that  purpose. 

So  far  as  these  latest  changes  have  proceeded  they  corroborate 
not  only  the  predictions  made  in  the  book,  but  the  principle  on 
which  those  predictions  were  made,  namely,  history's  repetition 
of  itself.  The  results  of  the  Great  War  in  matters  economic 
have  been  a  close  parallel  with  those  resultant  from  the  Civil 
War,  and  from  the  Spanish  War  of  1898,  except  that  all  scales 
of  magnitude  have  been  increased.  But,  just  as  those  basic 
economic  tendencies  which  this  book  reveals  as  having  proceeded 
steadily  ever  since  long  before  the  Civil  War,  and  continued 
down  to  the  latest  moment,  with  a  scarcely  perceptible  waver 
in  deference  to  either  that  war  or  the  war  of  1898 — with  accelera- 
tion, indeed,  by  each  of  those  wars — so  it  is  only  natural  to 
remark  now  how  slightly  this  path  of  social  evolution  has  been 
altered  by  even  the  Great  War  of  1914,  except  in  its  accelera- 
tion thereby.  We  have  no  excuse  for  doubt  as  to  what  is  coming. 

The  material  embodied  in  this  book  was  originally  collected 
to  form  only  the  first  volume  of  a  two-volume  work.  But  it  has 
so  expanded  in  amount  and  importance  during  its  preparation, 
and  the  doubt  as  to  when  the  second  volume  might  be  completed 
has  become  so  great,  while  the  urgency  of  the  times  for  remedial 
information  has  become  so  intense,  that  the  second  volume  will 
appear  later  under  an  independent  title:  "The  Evolution  of 
Social  Crises/'  Its  task  is  to  trace  the  growth  of  social  crises 
of  the  past,  in  other  lands  as  well  as  our  own,  as  another  step 
toward  the  formulation  of  a  natural  science  of  cause  and  effect 
in  social  evolution.  For  our  possession  of  such  a  science  would 
equip  us  for  the  prediction  of  all  future  crises  before  they  become 
acute ;  and  with  accurate  prediction  their  violence  might  be 
much  softened,  even  if  they  might  not  be  altogether  prevented. 

The  chapter  of  the  present  book  upon  Unemployment  also 
comprises  some  allusions  to  the  author's  past  work  in  the  field 
of  thermodynamics  and  energetics,  as  set  forth  in  his  volume 
entitled:  "Energy"  (1909),  from  which  viewpoint  all  prob- 
lems in  sociology  must  be  stated  if  they  are  ever  to  receive 
accurate  solution.  This  correlation  of  the  natural  energetic 
sciences  into  a  circle  destined  to  be  crowned  by  their  highest 
development  of  all,  sociodynamics,  has  already  been  mapped  out 
and  partly  committed  to  paper,  to  form  later  a  separate  work 
entitled:  "The  Elements  of  Social  Energetics."  It  is  as  a 


PREFACE  IX 

foreshadowing  of  this  later  work  that  some  of  the  technical 
passages  in  this  present  book  can  be  better  understood. 

The  author  wishes  to  acknowledge  the  invaluable  assistance  of 
Mr.  W.  W.  Harris,  formerly  city-editor  of  the  New  York  Tele- 
gram and  Evening  Sun,  in  guiding  the  manner  of  presentation 
of  so  technical  a  subject  as  social  evolution,  so  as  to  be  accept- 
able to  the  largest  number  of  readers.  But  it  would  not  be  fair 
nor  correct  to  make  Mr.  Harris  responsible  for  any  of  the  specific 
and  somewhat  radical  views  set  forth  herein,  however  he  aaay 
be  in  sympathy  with  their  general  tenor. 

This  book  represents  what  the  author  believes  should  have  been 
the  major  duty  and  official  business  of  the  entire  profession  of 
economists  and  sociologists  during  the  last  quarter-century.  It 
was  during  the  winter  of  1889-90  that  the  author,  instigated  by 
reading  Henry  George's  "Progress  and  Poverty"  and  Edward 
Bellamy's  "Looking  Backward,"  and  having  just  reached  the 
age  of  interest  in  public  affairs,  perceived  the  striking  crudities 
of  the  commercial  system  as  the  one  crucial  problem  destined 
to  form  the  nucleus  around  which  the  next  generation  of  prog- 
ress must  gather  shape.  So  vast  are  the  aggregates  of  human 
effort  involved  in  this  question  that  it  was  to  him  indubitable 
at  that  time — although  then  one  saw  the  >word  socialism  in  print 
not  twice  a  year — that  those  men  who  were  busying  themselves 
with  the  formation  of  such  enterprises  as  the  Standard  Oil 
Company,  the  Pennsylvania  Railroad  or  the  United  States  Steel 
Corporation  were  playing  at  tops  and  marbles,  in  comparison 
with  the  man's  job  of  straightening  out  our  world-system  of 
economics  as  a  whole. 

This  opinion  every  day's  news  since  then  has  corroborated. 
The  author  cannot  understand  how  the  men  whom  he  meets  in 
daily  life,  and  still  less  those  who  are  charged  with  national 
affairs  or  professional  sociology,  can  live  and  delve  and  die  with 
eyes  and  minds  sealed  to  this  vast,  protuberant,  overwhelming 
fact.  Yet  still  one  is  forced  to  argue  that  there  is  something 
there  worthy  of  notice ! 

Circumstances  have  required  the  author  to  handle  this  vast 
topic  during  the  spare  time  of  a  life  which  had  first  to  support 
a  family.  The  task  which  should  have  been  shared  with  the 
entire  profession  of  economists  he  has  had  to  compass  single- 
handed.  It  is  hoped  that  this  fact  may  serve  as  pardon  for 
those  errors  sure  to  be  revealed  in  a  work  which  has  been  con- 


X  PREFACE 

scientiously  compiled.  It  should  also  excuse  the  lateness  of 
its  appearance  in  the  face  of  a  crisis  so  great  that,  judging 
mathematically  from  previous  crises,  each  minute  of  delay  in 
effective  action,  on  the  part  of  this  great  energetic  nation,  con- 
demns one  additional  wretch  to  writhe  and  die  in  the  throes  of 
the  coming  world-revolution. 

NEW  YORK  CITY, 
December,  1920. 


CONTENTS 

PART  I 
THE  BACKGROUND 

CHAPTER  PAGE 

I. — THE  APPROACH  1 

II. — THE  SOLE  AIM  OF  INDUSTRY:  LIFE- SUPPORT  ...     37 
III. — THE  COTTAGE-SYSTEM  AND  THE  FACTORY-SYSTEM    45 

PART  II 
ECONOMIC  PRINCIPLES 

IV. — PRODUCTION 55 

V. — CREDIT 71 

VI. — THE  BASIC  CONTRAST  IN  ECONOMICS 127 

VII. — THE  MARKET-SYSTEM,  OR  COMMERCIALISM 159 

VIII. — THE  EFFICIENCY  OF  SOCIAL  ORGANIZATION 178 

IX. — THE  WEAPONS  OF  COMMERCIAL  COMBAT 191 

X. — INTEREST  AND  DIVIDENDS 204 

XI. — ECONOMIC  EQUILIBRIUM,  OR  "CHARGING  ALL  THE 

TRAFFIC  WILL  BEAR" 232 

XII. — OTHER  FEATURES  OF  INTEREST 254 

XIII. — THE  IRREVOCABILITY  OF  INTEREST 332 

XIV. — COMMERCIAL  COMPETITION  AND  ENTROPITS 343 

PART  III 
DATA 

XV. — RECENT  ECONOMIC  HISTORY 357 

XVI. — WAGES  AND  SALARIES 441 

XVII. — WEALTH,    INTEREST   AND   AGGREGATE   COMMER- 
CIALISM      458 

XVIII. — INDIRECT  LIGHT  UPON  THE  GROWTH  OF  COM- 
MERCIALISM    484 

XIX.— THE  COST  OF  LIVING 524 

xi 


Xll  CONTENTS 

PART  IV 
SOCIAL  REACTIONS 

CHAPTER  PAGE 

XX. — UNEMPLOYMENT    579 

XXI.— PANICS  AND  CRISES 648 

XXII.— MISCELLANY  672 

XXIII. — THE  EVOLUTION  OF  AMERICAN  Civic  CONSCIOUS- 
NESS      703 

Mezzanine  Chapter. — THE  AUTHOR'S  POINT  or  VIEW 711 

XXIV. — THE  REMEDY — CONSUMERISM  AND  CONSUMERA- 

TION   723 

XXV.— THE  PATH  BEFORE  Us. .  775 


NOTE 

1. — THE   MATHEMATICAL  LAW  OF   CHARGING   ALL  THE 

TRAFFIC  WILL  BEAR 839 

2. — THE  ORIGIN  OF  BOLSHEVISM.  .       , 843 


SYNOPTICAL  TABLE  OF  CONTENTS 

PAET  I.— THE  BACKGROUND 

CHAPTER  I:  THE  APPROACH.— An  outline  of  the  material 
development  of  the  United  States  from  colonial  times 
to  the  middle  of  the  nineteenth  century. 

Diseases  of  nations  more  important  than  those  of  individuals;  solu- 
tion of  present  ills  to  be  found  in  a  study  of  the  growth  of  the  past 
into  the  present;  contrast  between  1815  and  1915;  cotton-culture;  trans- 
portation and  communication;  the  era  of  anthracite;  the  dawn  of 
modern  technical  development;  engineering  history  of  the  nineteenth 
century;  the  blunder  of  1840  in  economics. 

CHAPTER  II:  THE  SOLE  AIM  OF  INDUSTRY:  LIFE- 
SUPPORT.— Settles  at  the  start  the  aim  of  all  economic 
effort:  "Feed  the  Ultimate  Consumer!"  Judges  all  in- 
stitutions in  terms  of  this  criterion  and  ascribes  all  con- 
fusion of  mind  to  its  neglect. 

Economic  institutions  underlie  and  control  political  ones;  the  aim  of 
all  economic  institutions :  '  *  Feed  the  Ultimate  Consumer ! ' '  Our 
economic  motor-nerves;  the  Ultimate  Consumer  the  sole  sovereign  of 
all  industry;  value  and  valuation. 

CHAPTER  III:  THE  COTTAGE-SYSTEM  AND  THE  FAC- 
TORY-SYSTEM.—Draws  contrast  between  the  indus- 
trial system  prevalent  in  the  eighteenth  to  early  nine- 
teenth centuries,  and  that  which  had  replaced  it  by  the 
end  of  the  nineteenth. 

The  cottage-system  that  which  replaced  the  feudal  system ;  the  cottage- 
system  in  turn  replaced  by  the  factory-system;  this  replacement  results 
in  a  marvelous  development  of  material  wealth;  the  characteristic  of  the 
cottage-system  is  ownership-in-industry,  while  that  of  the  factory-system 
is  the  abolition  of  all  ownership-in-industry;  the  cottage-system  based 
upon  universal  competition,  while  the  factory-system  is  based  upon 
enforced  monopoly ;  the  cottage-system  based  upon  commercial,  interest- 
bearing  credits,  while  the  factory-system  is  based  upon  free,  non- 
interest-bearing  credit. 

xiii 


XIV  SYNOPTICAL  TABLE   OF  CONTENTS 


PART  II.— ECONOMIC  PKINCIPLES 

CHAPTER  IV:  PRODUCTION.— Explains  the  organization  of 
production  and  debates  the  laws  governing  its  current 
volume;  this  not  determined  by  free  will  or  voluntary 
preference,  but  by  relentless,  automatic  laws  of  economic 
equilibrium.  First  lesson  in  involuntary  soeial  sub- 
consciousness. 

Definition;  specialization  of  tasks  and  interchange  of  work;  factory- 
credit;  the  national  factory-system;  volume  of  production;  personnel  of 
the  factory-system.  "Nothing  can  be  produced  Unless  it  can  be  Sold." 

CHAPTER  V:  CREDIT.— Explains  the  vital  function  of  credit 
in  either  permitting  a  community  to  exert  itself  for  its 
own  life-support  and  prosperity,  or,  by  its  absence,  para- 
lyzing all  effort  and  impoverishing  a  potentially  rich 
nation;  also  traces  the  history  of  credit. 

Credit  the  economic  catalytic;  the  function  of  a  catalytic;  the  nature 
and  function  of  credit ;  the  function-  of  gold ;  the  vital  importance  of 
credit;  the  transforming  power  of  credit;  history  of  commercial  credit; 
English  "  tallies";  classification  of  forms  of  credit;  commercial 
authorities  quoted;  recent  instances  of  credit-expansion;  first  glimpses 
of  the  nature  of  interest;  the  true  owners  of  credit;  commercial  credit 
versus  factory-credit.  Second  lesson  in  involuntary  social  subconscious- 
ness;  effects  upon  society  independent  of  moral  intent.  Re-invested 
credits;  the  expansion  of  1901;  Kussell  Sage  and  other  commercial 
authorities ;  confiscation  ;  the  century 's  accumulation  of  interest -bearing 
securities;  insurance-credit;  commercial  insurance  versus  natural  insur- 
ance; credit-bases;  economic  reform  necessarily  embodies  a  new  system 
of  credit;  the  function  of  ethics  in  economic  reform. 

CHAPTER  VI:  THE  BASIC  CONTEAST  IN  ECONOMICS.— 

Shows   the   dual  nature   of   the   modern   industro-com- 
mercial  system,  in  parallel  with  duality  everywhere  else. 

Production  versus  negotiation;  the  factory-system  versus  the  market- 
system;  deadly  parallel  between  the  two;  the  economic  despot;  charg- 
ing  all  the  traffic  will  bear;  the  equities  of  ownership-in-industry ;  the 
ethics  of  commercialism;  the  true  source  of  all  material  wealth; 
ownership-in-industry  a  parasite  upon  productivity;  industrial  anarchy; 
the  great  economic  question  of  the  day — is  ownership-in-industry  growing 
upon  us  ?  The  dual  progress  of  economic  evolution ;  centralization  through 
consolidation  versus  decentralization  through  invention;  the  modern 
factory-system;  economic  motive  forces;  profit-sharing;  discontent;  the 
basic  contrast  running  through  all  energetic  sciences. 


SYNOPTICAL  TABLE  OF  CONTENTS  XV 

CHAPTER  VII:  THE  MARKET-SYSTEM,  OR  COMMER- 
CIALISM.— Defines  the  modern  development  of  that 
antiquated  feature:  ownership-in-industry,  which  was 
peculiarly  characteristic  of  the  obsolete  cottage-system. 

The  ramifying  intricacy  of  the  market-system;  transportation  and 
communication  the  creators  of  modern  commercialism;  human  demand 
unlimited;  artificial  enticements  to  buy  unnecessary;  retail  commercial-  * 
ism;  the  Ultimate  Consumer  the  sole  source  of  economic  power;  con- 
tributory commercialism;  the  national  market -system ;  commercialism 
always  antagonistic  in  nature;  human  nature  and  social  reorganization; 
the  basic  economic  contrast  again;  futility  of  welfare-work:  the  com- 
mercial tourney;  emulation  and  competition. 

CHAPTER  VIII:  THE  EFFICIENCY  OF  SOCIAL  ORGAN- 
IZATION.— Debates  the  efficiency  of  the  industro-com- 
mercial  system  of  the  nation,  when  considered  as  a  unit. 

Eelationships  versus  components;  sociology  astray  on  individualism; 
social  architecture;  bitter  social  philosophy;  social  versus  individual 
evolution ;  the  basic  economic  contrast  again ;  natural  cost ;  value ;  valua- 
tion; efficiency  of  economic  organization;  the  one-hundred-per-cent  com- 
munity; polling  the  economic  community;  personal  efficiencies;  aggre- 
gate economic  energies. 

CHAPTER  IX:  THE  WEAPONS  OF  COMMERCIAL  COM- 
BAT.— Discusses  the  mechanism  of  offense  and  defense 
employed  by  the  commercial  world  in  its  unremitting 
internal  warfare. 

DEFINITIONS:  Productivity  and  wages;  commercialism  and  diluits; 
rent;  interest  and  dividends;  entropits;  costs  of  doing  business;  rent 
again. 

CHAPTER  X:  INTEREST  AND  DIVIDENDS.— Opens  de- 
bate as  to  the  one  most  formidable  weapon  of  all  the 
accoutrements  of  commercial  militarism. 

The  Ultimate  Consumer  the  sole  source  of  all  interest;  expansion  of 
facilities;  initiative;  investment  an  opportunity  rather  than  a  burden; 
risk  in  commercialism;  commercial  privateering;  initiative  and  expan- 
sion in  the  factory-system ;  capital  versus  capitalism ;  theories  of  interest ; 
interest  warranted  by  original  act!  interest  as  a  promoter  of  thrift? 
income  and  outgo  of  interest;  depreciation;  commercial  authorities  on 
the  origin  of  capitalism;  interest  as  a  fruit  of  unproductivity f  oppor- 
tunity for  investment;  water  or  dust;  economic  hypnosis;  economic 
equilibrium. 


XVi  SYNOPTICAL  TABLE  OF  CONTENTS 

CHAPTER  XI:  ECONOMIC  EQUILIBRIUM,  OR  "CHARG- 
ING ALL  THE  TRAFFIC  WILL  BEAR."— Discusses 
the  forces  the  balance  between  which  determines  quanti- 
ties and  qualities  at  each  point  in  the  economic  system. 
One  of  the  four  most  important  chapters  in  the  book. 

Gravitation  of  economic  phenomena  toward  a  stable  balance;  increase 
of  profits  with  decrease  of  trade;  illustration  of  the  flour-supply;  com- 
petition no  bar  to  raising  prices,  but  a  compulsion  to  raise  them;  in- 
creasing costs  of  doing  business;  character  of  forces  at  work;  psy- 
chology or  morality  not  a  factor;  the  seller  hired  by  the  community 
to  raise  prices;  higher  prices  restrict  trade;  computation  of  the  point  of 
maximum  income  to  the  seller;  community -nutrition ;  mathematical  law 
of  charging  all  the  traffic  will  bear;  trade  everywhere  paralyzed  by  com- 
mercialism; competition  the  death  of  trade;  factors  determined  auto- 
matically by  economic  equilibrium;  society's  universal  automatic  brake; 
the  fluidity  of  economic  forces;  the  commercial  brake  upon  civilization; 
life  under  adversity;  social  erosion;  modern  patriotism;  modern  lack  of 
liberty. 

CHAPTER  XII:  OTHER  FEATURES  OF  INTEREST.— 
Carries  the  debate  as  to  the  nature  and  effect  of  interest 
into  many  important  questions  of  the  day. 

Bonds;  preferred  and  common  stock;  gradation  of  commercial  risk; 
stock  without  face-value;  watered  stock;  the  origins  of  capitalism; 
thrift  and  capitalism;  reinvested  dividends;  surplus;  the  Ultimate  Con- 
sumer the  sole  source  of  all  capitalism;  recent  acceleration  of  surplus- 
looting;  who  owns  the  surplus?  surplus  the  foundation  of  commercialism; 
cost  of  replacement;  prices  of  materials,  interest-charges  and  valua- 
tion of  principal  always  mutually  linked  in  balance;  watered  stock; 
commercial  authorities  under  oath;  the  railway-corporations  and  the 
surplus;  commercial  "costs";  the  Kansas  City  Union  Depot;  economic 
liberty;  the  true  equities  of  commercial  ownership;  the  true  origin  of 
all  capitalism;  principles  underlying  price-making;  charging  all  the 
profits  will  bear;  passive  and  active  capitalism;  Professor  Fisher's 
theory  of  interest;  who  loans,  and  who  pays  interest?  factory-system 
capital  for  expansions;  pioneering  under  commercialism;  submarine 
economics;  foresight  and  commercialism;  proprietary  rewards  and 
progress;  the  blunder  of  1840;  economic  patriotism;  capitalism  and 
immigration ;  commercialism  versus  socialism ;  the  ' ( use ' '  or  pro- 
ductivity theory  of  interest;  dependence  of  capital-valuation  upon  in- 
come; the  Ultimate  Consumer  again  proved  the  sole  source  of  all 
capitalism;  zero  interest-rates;  the  railway-problem  in  outline;  stock- 
watering;  dividends  on  dead  horses;  recent  expansion  of  capitalization; 
normal  commercialism;  summary  of  the  essential  factors  in  the  nature 
of  interest. 


SYNOPTICAL  TABLE  OF   CONTENTS  XV11 

CHAPTER  XIII:  THE  IRREVOCABILITY  OF  INTEREST. 

— Can  a  charitable  destination  of  interest  redeem  the 
evil  of  its  birth  ? 

Income  versus  outgo  of  interest;  petty  capitalism  breeds  petty  ethics; 
wealth  and  charity;  ineffectiveness  of  charity;  basic  economic  contrast 
again. 

CHAPTER  XIV:  COMMERCIAL  COMPETITION  AND  EN- 
TROPITS. — Discusses  the  active,  energetic,  aggressive 
friction  and  impact  of  the  commercial  world,  with  ac- 
curate definitions  of  itself  and  its  effects. 

Subdivisions  of  entropits;  does  advertising  increase  trade!  Trade  de- 
pressed by  all  forms  of  commercialism;  advertising  as  an  educator; 
advertising  as  a  false  stimulant  of  journalism ;  the  fetish  of  the  twentieth 
century;  commercialism  consists  in  acquiring  what  one  doesn't  want, 
because  others  will  be  sure  to  want  it. 

PART  III.— DATE 

CHAPTER  XV:  RECENT  ECONOMIC  HISTORY.— Reviews 

the  statistical  data  available  as  to  the  economic  develop- 
ment of  the  United  States  during  the  seven  decades 
from  1845  to  1915. 

Per-capita  data;  density  of  population;  drift  from  agricultural  to 
technical  vocations;  drift  from  domestic  to  wage-earning  vocations; 
these  drifts  as  worldwide  tendencies;  congestion  in  cities;  distribution 
of  urban  population;  average  growth  versus  individual  growth;  the 
world-drift  into  cities;  migration  enforced  by  commercialism;  editorial 
acumen;  social  involuntariness  again;  growth  of  the  nation's  life- 
support;  program  of  analysis  of  the  nation's  efficiency  of  economic 
organization;  evolution  of  life-support  in  the  United  States;  prosperity, 
disparity  and  discontent;  the  nullified  law  of  supply  and  demand;  futile 
reforms;  traffic  charged  all  it  will  bear;  national  vanity;  automatic  in- 
voluntariness again;  increase  in  technical  wealth;  women  in  gainful 
employment;  the  nation's  occupations  analyzed;  classification  of  occu- 
pations ;  basic  statistics,  as  to  production  and  commercialism,  in  con- 
trast; the  quantity  x;  America  in  1850;  the  quantity  y;  relative  growth 
of  technology  and  commercialism;  subconscious  social  versus  conscious 
individual  forces;  competitive  or  commercial  occupations;  a  factory- 
eystem  metropolis;  economics  and  esthetics;  opera  under  commercialism; 
esthetic  decadence  through  commercialism;  confusion  profitable  under 
commercialism ;  economic  versus  moral  dissipation ;  indirect  commercial 
waste ;  social  metabolism ;  relative  rates  of  growth ;  non-combatant 
costs;  commercialism  becoming  critical;  science  and  technology  as  aids 
to  commercialism;  automatic  involuntariness  again;  wanted — a  science 


XVlil  SYNOPTICAL  TABLE  OF  CONTENTS 

CHAPTER  XVI:  WAGES  AND  SALARIES:  Chiefly  Statistical. 

Population  versus  personnel;  statistics  of  wages;  maxima  and  minima 
of  wages;  wage-coefficients;  salaries;  general  trend  of  wages  and 
salaries;  aggregate  wages  and  salaries  paid  by  the  Ultimate  Consumer, 
1850  to  1910;  dilution  of  the  Ultimate  Consumer's  purchasing-power. 

CHAPTER  XVII:  WEALTH,  INTEREST  AND  AGGRE- 
GATE COMMERCIALISM.— Brings  together  the  data 
as  to  classification  of  individuals  accomplished  in 
Chapter  XV,  with  that  as  to  relative  ability  collected  in 
Chapter  XVI,  to  a  synthetic  determination  of  thtf  effi- 
ciency with  which  the  nation's  industro-commercial  sys- 
tem makes  use  of  the  Ultimate  Consumer's  dollar.  One 
of  the  three  or  four  pivotal  chapters  of  the  book. 

Interest  paid  upon  all  forms  of  property ;  the  interest-rate ;  aggregate 
interest-burden  upon  the  Ultimate  Consumer;  the  heart  of  the  body- 
economic;  current  commercial  dissipation  of  economic  energy;  our 
mysterious  economic  cancer  identified;  struggle  between  capital  and 
labor  a  side-issue;  national  economic  efficiency;  unimportance  of  the 
personal  factor;  the  author's  estimates;  graphs  of  our  degradation  of 
economic  efficiency;  increase  in  our  material  basis  for  enjoyment;  our 
loss  in  social  vitality  exceeds  that  measurable  in  economic  energy; 
our  social  evolutionary  air-brake;  concrete  applications;  the  reader's 
responsibility. 

CHAPTER  XVIII :  INDIRECT  LIGHT  UPON  THE  GROWTH 
OF  COMMERCIALISM.— A  Review  of  various  side- 
aspects  of  modern  economic  society. 

Transportation  and  communication;  invention;  commercialism  and 
journalism;  automatic  involuntariness  again;  modern  muzzling  of  free 
speech;  history  of  journalism;  " boiler-plate ";  growth  of  advertising; 
charging  literature  all  the  profits  will  bear;  outdoor  display;  manu- 
factures ;  centralization  or  decentralization ;  the  latter  our  real  problem ; 
decentralization  in  series  and  in  parallel;  the  high  cost  of  buying; 
growth  of  factories  in  size;  the  "  harvester  -trust ";  particular  manu- 
factures; ethics  and  social  evolution;  the  time-factor  in  social  evolution. 

CHAPTER  XIX :  THE  COST  OF  LIVING.— Chiefly  Statistical. 

The  price-index;  general  principles  of  price-determination;  technical 
education  and  prices;  effect  of  gold-supply  upon  prices;  price-variations 
during  past  centuries;  professional  economists  and  the  gold-theory  of 
prices;  density  of  population  and  prices;  supply  and  demand  as  de- 
terminants of  prices;  commercial  distortion  of  natural  supply  and 


SYNOPTICAL  TABLE  OF  CONTENTS  XIX 

demand;  the  function  of  psychic  forces;  summary;  influence  of  war 
upon  prices;  identity  of  war  and  commercialism;  source  of  credit- 
expansion;  the  tides  of  war;  war-credits  and  prices;  peace  and  com- 
mercialism; cost  of  war;  replacement  of  martial  by  commercial  mili- 
tarism; cumulative  nature  of  commercialism;  credit  as  the  social  cata- 
lytic; taxation. 

PART  IV.— SOCIAL  REACTIONS 

CHAPTER  XX:  UNEMPLOYMENT.— Offers  the  only  treat- 
ment of  this  subject  as  a  natural  phenomenon,  subject 
to  natural  laws,  which  is  known  to  the  author.  Another 
of  the  pivotal  chapters. 

The  right  to  employment;  the  deficit  in  employment;  efficiency  in 
social  hiring-power ;  the  natural  economic  society;  insane  economics; 
purchasing-power  and  hiring-power;  economic  walls  and  wall-builders; 
the  sovereignty  of  interchange  over  production;  real  and  imaginary 
demand;  exertion  no  criterion  of  economic  worth;  over-work;  concen- 
tration of  the  deficit  in  employment ;  arterial  and  venal  economic  circu- 
lation. The  Basic  Law  of  Employment  and  Unemployment.  Cherished 
delusions  as  to  unemployment;  competitive  wage-system;  impotence  of 
the  oppressed;  quantitative  and  qualitative  unemployment;  automatic 
involuntariness  again;  character  and  unemployment;  the  employer's 
deficit  in  purchasing-power  for  labor;  universal  economic  paradox;  life, 
labor  and  hope,  all  charged  all  the  profits  will  bear;  the  "starvation- 
wage";  the  "submerged  tenth";  basis  for  true  optimism;  basic 
economic  contrast  again;  the  manufacture  of  ethics;  function  of  credit 
in  employment  and  unemployment;  statistics  of  unemployment;  natural 
gravitation  in  unemployment;  true  nature  of  "surplus  labor";  auto- 
matic involuntariness  again ;  unemployment  in  the  commercial  world ; 
unemployment  in  trades-unions;  recent  history  of  unemployment  the 
"silent  panic''  of  1913-1914;  unemployment  and  seasonable  trades; 
deficit  in  employment  indubitable;  inanimate  unemployment;  economic 
paradoxes  again;  intellectual  responsibility  and  patriotism;  unemploy- 
ment not  due  to  surplus  labor,  nor  to  labor-saving  machinery;  modern 
rights  of  man;  technique  of  the  energetics  of  unemployment;  social 
energetics ;  relativity. 

CHAPTER  XXI:  PANICS  AND  CRISES— Chiefly  historical 
and  statistical. 

The  economic  barometer;  inevitable  fate  of  any  cumulative  expan- 
sion; historical;  maximum  periods  of  commercial  failures;  bank-failures; 
railway-receiverships;  fractional  versus  fundamental  crises;  gradual  dis- 
appearance of  currency-weakness  as  a  source  of  panic,  with  simultaneous 
rise  of  high  prices  as  irritant;  stocks  and  bonds;  the  "Silent  Crisis" 
of  1914;  the  modern  economic  detonator — high  prices  due  to  growing 
cost  of  commercialism. 


XX  SYNOPTICAL   TABLE  OF   CONTENTS 

CHAPTER  XXII:  MISCELLANY.— Touches  a  series  of  high 
spots  in  current  economic  progress. 

Capital  and  labor;  strikes  and  lockouts;  the  minimum  wage.  Auto- 
matic social  involuntariness.  Congestion  in  cities;  rapid  transit  a 
creator,  rather  than  a  cure,  of  congestion;  history  of  New  York's  rapid 
transit.  Incomes.  The  census.  Public  ownership. 

CHAPTER  XXIII:  THE  EVOLUTION  OF  AMERICAN 
CIVIC  CONSCIOUSNESS.— A  historical  review  of  the 
larger  aspects  of  American  public  opinion. 

Ethics  in  1850;  the  rise  of  the  slavery-issue;  Northern  indifference  to 
it;  slavery  as  a  big  business;  its  menace  to  the  Union  effective  where 
its  cruelty  failed  to  impress;  reconstruction;  the  tariff;  the  mugwumps; 
rising  influence  of  conscious  commercialism;  organization  of  both 
capitalism  and  labor;  our  attitude  toward  the  impending  conflict  parallel 
with  that  toward  the  slavery-issue — a  topic  resumed  near  the  end  of  the 
Mezzanine  Chapter. 

MEZZANINE  CHAPTER:  THE  AUTHOR'S  POINT  OF  VIEW. 
— Written  in  response  to  the  wave  of  anti-radical  hysteria 
which  swept  this  land  during  1919  and  1920. 

History  of  the  central  idea  of  this  book;  Edward  Bellamy;  the  rise  of 
economic  issues  out  of  the  academic  into  vital  importance;  the  author's 
genealogy;  his  loyalty  to  American  political  ideals;  contrast  between 
our  political  democracy  and  our  economic  oligarchy;  domination  of  the 
former  by  the  latter ;  reform  versus  revolution ;  the  nucleus  of  our 
social  cancer;  surgery  requisite  for  its  cure.  Parallel  between  political 
and  economic  liberty;  the  slight  power  of  social  will;  social  prediction; 
Abraham  Lincoln  and  negro-slavery;  Buchanan  and  Harding;  treason 
versus  loyalty  to  civilization. 

CHAPTER  XXIV:  THE  REMEDY— CONSUMERISM  AND 
CONSUMERATION.— Outlines  the  field  in  which  alone 
permanent  reform  can  be  found.  Sets  up  a  competent 
reply  to  socialism. 

Dominant  forces;  economic  democracy;  consumerism;  socialism;  the 
Intercollegiates ;  American  socialism ;  consumerism  versus  socialism  ; 
automatic  social  involuntariness  again;  class-consciousness;  consumera- 
tion;  jewishness;  economic  reform;  public  ownership;  fluidity  of  eco- 
nomic causes  and  effects;  confiscation  of  property. 

CHAPTER  XXV:  THE  PATH  BEFORE  US.— Adds  the 
author's  personal  recommendations  to  the  virtually  im- 
personal chapters  which  have  preceded. 


SYNOPTICAL  TABLE  OF  CONTENTS  XXl 

"Organize  as  Ultimate  Consumers!"  The  pivotal  fact  of  the  imme- 
diate future;  the  detonator  of  social  high  explosives.  Education  as 
to  the  truth  a  vital  necessity;  futility  of  inadequate  reform;  free  speech 
in  college  and  press ;  liberation  of  the  press  from  domination  by  adver- 
tising; advertisements  mixed  with  reading-matter;  modern  town- 
meeting;  self-supporting  advertising.  The  universities.  French  Revolu- 
tion in  a  nutshell.  Inspection  of  the  social  structure  against  flaws; 
function  and  responsibility  of  our  schools  of  sociology ;  ' '  social  control ' ' ; 
intellectual  poltroonery.  Does  social  control  exist?  The  supreme  value 
of  candor;  university-militarism;  modern  patriotism;  greatest  question 
of  the  day;  recent  social  evolution;  "over  the  top"  in  social  reform; 
true  optimism;  modern.  Christianity  and  social  reform. 


DIAGRAMS 

FIG.  PAGE 

1. — Growth  of  Credit-Securities 110 

2. — General  Trend  of  Wages 444 

3. — Decline  in  National  Economic  Efficiency 475 

4. — America's  Lost  Opportunity. 477 


STATISTICAL  TABLES 

TABLE  PAGE 

1. — Cotton  Eaised  per  Capita  per  Annum :  1790-1915 10 

2.— Eiver-Steamboats  Built:    1815-1915 13 

3. — Foreign  and  Great  Lakes  Tonnage:  1800-1915 14 

4. — Imports  and  Exports,  including  Gold  and  Silver:  1790-1912...  15 

5. — Kailway-Facilities  in  the  United  States:  1830-1914 20 

6. — Eelative   Growth  of  Railway-Mileage  and  Locomotive-Power: 

1904-1915   22 

7. — Growth  of  Insurance :  1879-1913 89 

8. — Finance  and  Credit :    1865-1915 Ill 

9.— Banks  and  their  Resources :  1896-1916 112 

10. — Insurance  per  Capita:   1850-1914 115 

11.— Credit-Bases  and  Price-Indexes:   1865-1915 123 

12. — Charity  versus  Commercialism:   1877-1918 341 

13. — Population  and  its  Density:  1790-1910 359 

14. — The  Nation's  Broad  Classes  of  Vocation:  1820-1910 360 

15. — Occupations  in  Prussia:   1843-1895 361 

16. — Growth  of  Cities  in  Number:   1850-1910 362 

17. — Distribution  of  Urban  Population:   1850-1910 364 

18.— Average  Size  of  City:   1850-1910 365 

19. — Relative  Per  Cent  of  Urban  Population  in  Each  Clasg  of  City: 

1850-1910   365 

20. — Food-Supply  from  Farms:    1840-1915 374 

21. — Stock  on  Farms  and  Ranches:  1880-1915 375 

22. — Growth  of  Farms :    1850-1910 375 

23. — Meat-Supply  per  Capita  per  Annum:  1880-1910 376 

24. — Increase  in  Supply  of  Mechanical  Raw  Materials  per  Capita 

per  Annum :   1820-1915 385 

25. — Women  in  Industry:   1870-1910 387 

26. — Classification   of   Occupations 390 

27.— Total  and  Productive  Occupations:  1850-1910 392 

xxiii 


XXIV  STATISTICAL  TABLES 


TABLE  PAGE 

28.— Commercially  Combative  Occupations :   1850-1910 396 

29. — Various  Totals  of  Classified  Occupations:    1850-1910 404 

30. — Electric  Central  Power  Stations:    1902-1912 421 

31. — Relative  Growths:   1850-1910 432 

32. — Eelative  Growths:  1870-1910 433 

33. — Wages  in  Europe  and  America:   1890-1907 444 

34. — Maxima  and  Minima  of  Wages:  1770-1914 445 

35.— Wage-Coefficients:    1850-1914 446 

36. — Wages :  Average  per  Annum :  1850-1914 447 

37. — Wages  according  to  Dr.  Spahr :   1890 448 

38.— Salaries  per  Annum:   1890-1914 449 

39.— Wage  and  Salary  Coefficients :   1850-1914 451 

40. — Aggregate  Wages  and  Salaries :   1850-1920 454 

41.— Percentages  of  Total:  1850-1910 456 

42.— Aggregate  Wealth  per  Capita:   1850-1920 465 

43.— Relative  Rates  of  Growth  of  Wealth:    1880-1920 466 

44. — Commercial  Dissipation  of  Economic  Energy :   1850-1920 468 

45. — The  Expansion  of  Commercialism:   1850-1920 469 

46. — Expansion  of  Commercialism   (Author's  Estimate) 474 

47. — Relative    Growths    (Author 's    Estimate) 474 

48. — Increase  in  Material  Basis  for  Enjoyment:  1850-1910 478 

49. — Growth  of  Invention:   1840-1915 487 

50. — Growth  of  Communication :    1800-1915 489 

51. — Growth  of  Periodical  Literature:   1790-1910 496 

52.— Periodicals :   Classes  thereof:   1790-1910 497 

53. — Growth  of  Advertising  in  Periodicals:   1863-1910 498 

54. — Increase  in  Advertising-Space  in  Newspapers:   1880-1916 500 

55. — Growth  of  Advertising  in  New  York  Times:  1896-1916 502 

56. — Manufacture  in  terms  of  Population :   1850-1910 507 

57.— Manufacture :  Relative  Tendencies:   1850-1910 508 

58. — Number  of  Business-concerns  per  Capita:  1881-1916 511 

59. — Relative  Rates  of  Growth  in  Manufacture:  1850-1910 515 

60. — Agricultural  Implements:   1870-1910 516 

61. — Manufacture:  Particular  Industries:   1860-1910 518 

62. — Relative  Variation  in  Prices :   1841-1884 525 

63. — Relative  Variation  in  Wages  and  Prices:  1800-1915 527 

64. — The  Internal  Factors  in  Price-Determination 529 

65.— Variation  in  English  Prices:   1050-1800 540 

66. — Wars  and  Revolutions :    1850-1914 559 

66a. — Relative  Cost  of  War,  per  Capita 567 

67. — Proportion  of  Public  Revenue  and  Taxes  to  the  Ultimate  Con- 
sumer's Total  Expenditure:  1915 576 

68.— Relative  Unemployment:    1890-1900 624 

69.— Unemployment  in  Trades-Unions:    1897-1911 626 

70.— Unemployment  in  New  York  City  and  Vicinity:  1914-1915 629 

71. — Unemployment  and  Seasonable  Trades:   1915 630 

72.— Commercial  Failures:    1857-1916 659 

73. — Maximum  Periods  of  Commercial  Failure 660 

74.— Bank-Failures:    1865-1916 661 


STATISTICAL  TABLES  XXV 

TABLE  PAGE 

75.— New  York  City  Bank-Clearings :  1854-1916 662 

76. — Railway-Receiverships :    1876-1916 '. . .  664 

77. — Stocks  and  Bonds:  Volume  of  Sales:  1892-1916 666 

78. — Maxima  and  Minima  in  Stock-Prices:   1911-1917 668 

79.— Growth  of  Strikes  and  Lockouts :  1881-1905 676 

80. — Growth  of  Elevated-Railway  Traffic :  1872-1877 685 

81.— Growth  of  New  York's  Transit-Facilities:  1872-1916,,  .  689 


MODERN  ECONOMIC 
TENDENCIES 


PART  I 
THE  BACKGROUND 


CHAPTEK  I 

THE   APPROACH 

"//  there  exists  a  science  of  predicting,  of  directing  or  of  ac- 
celerating the  progress  of  the  human  race,  the  history  of  its  past  should 
l)e  the  first  foundation  therefor." 

CONDORCET,  "Progres  de  Tesprit  humain,"  1793. 

The  Diseases  of  Nations. — Since  the  opening  of  the  Great 
War  it  must  have  become  plain,  if  never  before,  that  the  menace 
of  death  and  misery  which  hangs  always  over  the  heads  of  the 
human  race  is  not  primarily  due  to  disease  or  accident.  In 
spite  of  our  scientific  conquests  over  mountain,  sea  and  air,  our 
victories  of  microbe  and  serunij  we  are  yet  forced  to  admit  the 
presence  of  another  unbeaten  adversary  to  happiness  than  topog- 
raphy or  disease — that  of  social  or  political  upheaval. 

When  it  comes  to  a  comparison  of  relative  sources  of  death- 
rate,  or  of  magnitudes  of  human  misery,  then  disease  must  take 
a  back-seat  in  favor  of  war  or  revolution.  Whether  we  consider 
disfiguring  small-pox,  the  "white  plague"  of  tuberculosis,  in- 
sidious typhoid  or  racking  cancer,  of  all  the  fields  of  pathological 
science  needing  attention  most  urgently,  that  of  the  diseases 
of  nations  must  surely  come  first. 

In  this  field,  as  in  other  departments  of  biology,  we  find  at 
work  two  distinct  sorts  of  enemy  to  health  and  happiness. 
There  is  first  the  assault  from  without — the  ruthless  invader  of 
our  domain  with  piercing,  maiming  violence.  There  is  also 
the  organic  or  microbic  internal  disease — the  internal  develop- 
ment of  a  poisoning  microbe,  bringing  on  an  automatic  con- 


i  MODERN   ECONOMIC   TENDENCIES 

vulsion  in  life's  efforts  to  readjust  itself  into  harmony  with  this 
novel  demafld  upon  its  vitalities. 

It  is  impossible  to  say  that  either  of  these  is  worse  than  the 
other.  Often  each  co-operates  with  the  other.  In  the  present 
Great  War,  for  instance,  both  are  at  work,  side  by  side.  Each 
of  the  belligerents  has  had  to  maintain  combat  with  dissension 
at  home  as  strenuously  as  with  the  enemy  outside  its  borders. 
Indeed,  in  the  final  fate  of  the  struggle  there  is  every  promise 
that,  in  all  lands,  the  former  may  be  a  factor  overshadowing 
the  latter.  Of  the  problems  which  promise  to  loom  large  and 
menacing  after  the  war  there  is  none  so  threatening  as  this 
of  internal  economic  strife. 

It  is  with  the  purpose  of  laying  a  foundation  for  future  peace 
and  stability,  at  home  as  well  as  abroad,  therefore,  that  this 
review  of  recent  American  progress  has  been  undertaken.  To 
accomplish  this  our  analysis  must  be  both  penetratingly  an- 
alytical and  boldly  synthetic.  No  superficial  glance  at  what 
everybody  knows,  nor  any  parrot's  repetition  of  worn-out 
formulae  will  suffice. 

Henceforth,  we  hope,  the  price  of  peace  is  to  be  one  of 
mere  intellectual  vigilance  and  daring,  rather  than  of  bodily 
sacrifice.  There  is  little  evidence  that  we  are  now,  or  ever 
have  been,  in  danger  through  physical  cowardice;  but  our  civi- 
lization is  already  a-tremble  through  intellectual  timidity.  If 
we  are  not  to  be  taken  by  surprise,  too  late  for  remedy,  by  an 
uncontrollable  crash  of  unexpected  events,  we  must  promptly 
acquire  new,  bold,  drastic  and  adequate  ideas,  competent  to 
meet  the  impending  crisis. 

Yet  one  must  begin  at  the  beginning.  In  order  to  start  aright 
we  must  first  summarize  some  more  or  less  superficial  and  ob- 
vious facts  which  may  be  familiar  to  many. 

The  astounding  changes  which  have  occurred  visibly  during 
the  last  century  are  a  trite  subject  for  eloquence.  Between  the 
America  of  1815  and  that  of  1915  the  contrasts  are  so  spec- 
tacular that  the  frequent  attempts  to  portray  them  have  be- 
come melodramatic.  Nevertheless  there  exists  a  real,  even  a 
dire,  need  for  a  more  penetrative  analysis  of  this  mushroom- 
like  growth  of  society  than  has  yet  been  made;  for  it  is  now 
more  than  suspected  by  serious  minds  that  modern  society,  like 
a  too  rapidly  grown  mushroom,  may  yet  embody  beneath  all 
its  glory  of  outward  coloring  some  subtle  hidden  poisons. 


THE   APPROACH  3 

Obviously  modern  civilization  is  not  breeding  happiness  in 
proportion  with  its  outward  display.  The  contentment  and 
stability  of  mankind  is  not  commensurate  with  its  technical 
intelligence.  Wisdom  lags  far  behind  knowledge.  War  or  revo- 
lution bursts  forth  too  frequently  and  unexpectedly.  The 
quieter  and  less  dramatic,  but  often  far  more  tragic,  tides  of 
daily  misery  and  discontent,  rising  as  in  a  vast  worldwide  sea, 
upon  the  surface  of  which  wars  disport  themselves  as  porpoises 
at  play,  warns  us  even  more  urgently  of  the  need  for  careful 
thought. 

Early  Economics. — The  aspect  of  this  land  about  a  century 
ago,  barely  beyond  the  span  of  some  lives  still  hale,  forms  a 
contrast  with  to-day  such  as  the  young  of  the  present  genera- 
tion can  scarcely  grasp.  Then  the  chief  occupations  of  this  now 
great,  rich  and  most  intricately  diversified  industrial  and  tech- 
nical nation  might  be  listed  upon  the  fingers  of  one  hand, 
namely:  (1)  Fisheries;  (2)  Ship-building  and  navigation; 
(3)  Agriculture;  (4)  Lumbering,  and  (5)  Hunting. 

For  the  eastern  mountains  still  supplied  furs  in  quantity. 
Salem  (Mass.)  was  still  a  chief  seaport,  overtopping  Boston 
and  rivaling  New  York.  Ohio  was  an  Indian  frontier.  Penn- 
sylvania was  still  a  purely  agricultural  state,  its  vast  mineral 
resources  only  barely  suspected.  Although  coal  and  iron  had 
been  mined  in  small  quantities  since  before  the  Kevolution, 
yet  the  first  real  cargo  of  anthracite  was  shipped  down  the 
Schuylkill  only  in  1804,  while  the  real  era  of  anthracite  did 
not  begin  until  about  1840.1 

Communication. — In  industrial  lines  New  England's  water- 
powers  and  mechanical  genius  were  only  just  budding  into  life. 
Transportation  and  travel,  up  to  about  1810,  were  confined 
wholly  to  horses  or  sails,  often  consuming  a  week  from  New 
York  to  Albany,  or  ten  days  to  Boston.  The  news  of  Washing- 
ton's death  was  three  weeks  in  reaching  central  New  England. 

Where  horse-travel  failed  to  prove  more  expeditious,  the  mails 
were  carried  in  square-rigged  sailing-vessels — usually  of  the 
cumbrous,  unseaworthy  and  now  obsolete  brig-rig — beating  labo- 
riously up  and  down  the  narrow  waters  of  Long  Island  Sound, 
or  skirting  precariously  the  unlighted  coast.  While  by  eighteen- 
ten  or  fifteen  this  torpidity  of  transit  had  been  much  enlivened 
along  the  coast  by  the  early  steamboats,  yet  the  interior  had 

iBogart,  "  Economic  History  of  the  United  States, "  1912. 


4  MODERN  ECONOMIC  TENDENCIES 

not  yet  dreamed  of  anything  better  than  horses,  and  usually 
even  these  could  be  used  only  for  riding  or  packing;  for  roads 
fit  for  wheeled  vehicles  were  few  and  very  poor.  The  advent 
of  the  railroad  was  then  as  far  ahead  in  the  future  as  the  Cuban 
War  is  now  behind  us  of  to-day. 

Travel  was  then  a  nightmare  of  labor  and  discomfort,  accord- 
ing to  present  standards.  Cooped  up  in  the  tiny  cabins  of 
sloops,  or  jolted  from  dawn  until  dark  in  crude  stage-coaches 
over  unspeakable  roads,  with  still  less  mentionable  taverns  the 
only  havens  of  rest,  the  day's  program  of  the  traveler  of  1815 
sounds  more  like  the  diary  of  a  modern  war-correspondent  or 
arctic  explorer  than  it  does  like  anything  a  part  of  civilized 
life.  Physical  comfort — or  rather,  modern  sensitiveness  to  the 
slightest  discomfort — was  then  unknown.  The  common  lot  of 
man  in  those  days  was  serf-like  toil,  a  bill  of  fare  meager  in 
variety  if  plenteous  in  volume,  occasional  famine,  and  a  Puritan 
sabbath  for  all  except  those  who  dared  openly  to  defy  public 
opinion.2 

Population  and  Productivity. — Should  the  reader  carry  with 
him  any  taint  of  the  commonly  prevalent  error  that  modern 
stress  of  life  arises  from  too  great  population,  dividing  up  too 
finely  the  opportunity  for  each,  a  mere  glance  at  the  good  year 
1815  will  suffice  to  dissuade  him.  With  all  the  resources  of  a 
rich  virgin  continent  then  wide  open  to  a  sparse  population, 
with  a  form  of  government  then  farther  in  advance  of  anything 
known  in  Europe  than  is  true  to-day,  and  with  a  frank  naked- 
ness of  any  hampering  tradition  or  caste,  life  then  was,  never- 
theless, a  dire  struggle  with  hunger,  cold,  disease  and  poverty. 
It  was  habitually  pursued,  even  by  well-to-do  people,  through  a 
length  of  working-day  well  exceeding  that  of  most  modern 
factories. 

The  striking  contrast  with  to-day  was  that  then  life  was 
free  and  certain — independent  of  one's  neighbor  except  by  ac- 
cident. Odious  contrasts  in  wealth  were  few  and  slight.  Dis- 
content might  free  itself  in  an  active  search  for  a  better  chance. 
Happiness  was  apparently  rife. 

The  problems  of  1815  were  physical  and  personal  ones,  as 

2  For  a  graphic  description  of  these  good  old  times  read  the  diary 
of  an  educated  New  England  girl's  trip  from  Connecticut  to  Ohio  in 
1810,  in  the  Atlantic  Monthly  for  September,  1912;  or  see  Bogart  and 
(Thompson's  " Readings  in  Economic  History, "  1916, 


THE   APPROACH  5 

those  of  1915  are  economic  and  organizational.  Just  as  our 
forefathers  stood  face  to  face  with  a  stark,  untamed  wilderness 
of  savage  forest,  so  we  to-day  face  a  similar  wilderness  of 
myriads  of  unknown,  unorganized  fellowmen. 

But  already  this  cheery  contentment  of  1815  with  unremitting 
toil  and  pioneer  hardship  was  rifted  by  the  lure  of  more  facile 
ways.  The  men  of  that  day  marveled  as  much  at  its  wonderful 
novelties  and  achievements,  its  glorious  advances  in  speed, 
power,  comfort  and  solidarity  over  previous  times,  as  we  do 
to-day  over  our  palatial  cars  and  ships,  our  airplanes,  wireless 
telegraphy  and  gasolinic  warfare.  The  period  of  the  birth  of 
our  land  as  an  independent  nation  happened  also  to  be  one  of 
phenomenal  progress  in  the  mechanic  arts,  on  both  sides  of  the 
Atlantic.  It  was  in  1781,  the  year  peace  was  declared  with 
England,  that  James  Watt  first  made  the  steam-engine — which 
had  been  in  use  for  pumping  water  since  1700 — available  for 
the  task  of  rotating  machinery.  It  was  in  1783-4  that  Henry 
Cort  advanced  the  iron-industry  by  two  huge  strides  at  once, 
by  the  introduction  of  his  puddling-forge  for  making  wrought 
iron,  and  by  the  use  of  grooved  rolls  for  forming  bars  of  various 
shapes. 

In  the  textile  industries  Arkwright's  spinning-frame  had 
been  in  use  since  1760,  but  its  full  value  first  became  available 
with  the  introduction  of  Cartwright's  power-loom  in  1790,  and 
with  the  later  development  of  rotative  steam-power  and  water- 
power.  In  1791  New  England  had  built  its  first  cotton-mill,  and 
by  1804  there  were  fourteen  in  operation  there.  In  1793-5 
Eli  Whitney,  of  New  Haven,  invented  his  cotton-gin.  About 
1805  Oliver  Evans,  of  Philadelphia,  introduced  the  practice  of 
using  "high-pressure"  or  non-condensing  steam-power,  as  an  im- 
provement over  the  more  cumbrous  condensing  type  which  the 
prestige  of  Watt  had  mistakenly  kept  in  use  in  England — a 
step  in  advance  in  practical  steam-engineering  which  for  over 
half  a  century  was  of  the  greatest  advantage  to  America,  in 
the  conquest  of  her  wilderness  and  the  development  of  her 
industries. 

Invention  and  Politics. — The  history  of  America  cannot  be 
understood  without  a  comprehension  of  this  remarkable  coin- 
cidence— if  indeed  it  were  such — whereby  the  American  con- 
tinent was  liberated  politically  at  virtually  the  instant  when 
man's  inventive  powers  were  freed  to  a  degree  never  before 


6  MODERN  ECONOMIC  TENDENCIES 

recorded  in  history,  and  his  muscles  thus  equipped  with  mechan 
ical  aids  adequate  to  the  invasion  of  the  wilderness.     All  of 
the  conditions  for  a  brilliant  expansion  of  industry  lay  ready. 

They  were  soon  to  bear  rich  fruit;  but  not  by  use  in  the  way 
then  honored  by  tradition.  Man  could  not  employ  these  new 
tools  in  his  individual  capacity,  in  isolated  efforts,  as  he  had 
those  of  earlier  times.  The  value  of  these  recent  acquisitions 
must  remain  largely  potential  only,  until  their  powers  might  be 
released  by  the  organization  of  men  into  unitary  economic  bodies, 
each  formed  of  many  individuals. 

Transportation. — But  this,  in  turn,  might  not  be  accom- 
plished without  much  better  means  for  transportation  and  com- 
munication. These  factors  were  fated,  indeed,  to  bear  cogent 
influence  upon  the  political  as  well  as  the  economic  destinies 
of  the  nation.  It  was  the  steadily  improving  means  for  internal 
communication  between  the  colonies,  really  initiated  and  en- 
forced by  the  needs  of  the  French  and  Indian  War,  which  had 
much  to  do  with  precipitating  the  Kevolution  of  1776.  It  was 
only  as  the  colonies  approached  physical  unity,  through  road- 
making,  that  they  acquired  that  sense  of  political  unity  and 
power  which,  weak  and  jealous  though  it  might  be,  yet  made 
independence  of  England  a  possibility. 

Previous  to  1750  there  were  virtually  no  wagon-roads  in 
America.  Transportation  of  bulky  commodities  was  possible 
only  by  sea;  and  by  sea,  piracy  united  with  small  ships  and 
lack  of  charts  and  lighthouses  to  make  the  risk  great.  On  land 
people  traveled  on  horseback,  or  very  commonly  afoot. 

In  Europe  the  eighteenth  century  was  a  period  of  building 
coach-roads,  but  in  America  this  policy  was  copied  somewhat 
tardily — to  be  accelerated  later,  when  the  mistake  had  been 
recognized.  The  colonies  were  mutually  jealous,  and  uncon- 
scious of  their  common  interest  in  economic  reciprocity.  In- 
tercolonial trade  was  not  encouraged  at  home,  and  was  actively 
repressed  by  England.  Local  war  frequently  threatened.  It 
was  only  after  the  year  1800,  following  more  than  a  dozen  years 
of  political  independence  and  free  interstate  commerce,  that 
stage-routes  became  continuous  from  Boston  to  Charleston,  or 
penetrated  as  far  west  as  Pittsburgh.3 

As  late  as  1825  reliance  was  still  shown  to  be  upon  com- 
munication by  water,  in  the  building  of  the  Erie  and  the  Chesa- 

3  Bogart. 


THE   APPROACH  7 

peake  &  Ohio  canals.  This  was  possibly  aided  by  the  fact  that 
it  was  only  at  this  date  that  the  first  wagon  with  springs  ap- 
peared. As  late  as  the  Centennial  of  our  Independence  the 
term  "spring-wagon"  was  still  in  common  use  throughout  the 
Middle  West,  as  indicating  a  wagon  distinctive  from  the  usual 
sort.  It  was  as  late  as  1838  that  the  federal  government  com- 
pleted its  "Xational"  turnpike,  or  "Cumberland  Road,"  begun 
in  1806,  across  Maryland,  Virginia,  Ohio,  Indiana  and  Illinois 
to  the  Mississippi — an  institution  familiar  to  every  American 
who  has  happened  to  grow  up  near  its  route,  but  unknown  or 
forgotten  by  all  the  rest. 

Yet  amelioration  of  this  situation  was  potentially  at  hand 
at  a  very  early  date.  As  far  back  as  1786  John  Fitch  had 
actually  driven  a  boat  by  steam  on  the  Delaware  River,  and 
Symmington  and  Miller  had  done  the  same  thing  in  England  in 
1788;  but  it  was  not  until  1807  that  Fulton  achieved  the  first 
success  of  immediate  practical  value,  on  the  Hudson — more  by 
reason  of  a  general  advance  in  public  intelligence  and  the  arts, 
and  in  urgent  demand  for  speed  and  certainty  in  transportation, 
than  by  superiority  of  mechanical  genius. 

Quickly  thereafter  the  steamboat  crept  into  a  position  of  im- 
portance in  American  life.  The  Hudson  became  the  greatest 
of  all  highways  into  the  interior.  The  main  route  to  the  West 
was  shifted  from  the  Ohio  river  to  Lake  Erie.  Steamboats  from 
New  York  through  Long  Island  Sound  made  Fall  River,  at  the 
head  of  Narragansett  Bay,  forty  miles  from  Boston,  in  little 
more  than  a  day,  cutting  the  earlier  trip  of  a  week  or  ten  days 
of  torture  by  stage-coach  down  to  two  nights  out.  The  Perth- 
Amboy  water-route  to  Philadelphia,  now  forgotten,  replaced 
by  boat  some  forty  miles  out  of  ninety  by  stage,  and  within  a 
few  years  steam  was  making  the  longer  outside  trips  to  the 
Chesapeake  and  even  challenging  Cape  Hatteras. 

Progress. — We  have  little  to  show  to-day  which  can  compare 
with  such  marvelous  advances  as  these  in  bringing  distant  com- 
munities into  prompt  touch  with  each  other.  It  is  not  that 
we  have  not  improved  inconceivably  over  these  methods  of  a 
century  ago,  but  that  our  last  dozen  years  have  shown,  with 
the  doubtful  exception  of  aviation,  nothing  like  the  rate  of  ad- 
vance in  speed  and  volume  of  communication  between  man  and 
man  that  theirs  did. 

For  it  is  difficult — nay,  impossible — for  the  younger  genera- 


8  MODERN  ECONOMIC  TENDENCIES 

tion  of  to-day  to  comprehend  the  isolation  of  community  from 
community  which  underlay  the  political  life  and  the  ethical 
institutions  of  the  days  of  Washington,  Franklin,  Adams,  Jeffer- 
son and  Hamilton.  That  they,  working  from  such  meager 
instances  of  solidarity  of  population  as  then  prevailed,  should 
have  been  able  to  enunciate  political  principles  so  pure  and 
exalted,  is  as  much  a  marvel  as  is  the  now  common  idea  that 
those  principles  (unless  interpreted  far  outside  their  original 
form  and  intent)  should  suffice  for  the  gigantic  extent  and  in- 
tense, intricate  solidification,  of  modern  populations. 

Cotton  and  Carriage. — From  the  opening  decade  of  the  nine- 
teenth century  the  history  of  American  economics  and  politics 
centers  chiefly  about  two  industries:  (1)  Cotton-growing  in 
the  South  and  cotton- weaving  in  the  North,  and  (2)  trans- 
portation, both  North  and  South.  While  the  North,  of  course, 
possessed  a  greater  variety  of  industry  than  the  South,  yet  even 
there  these  two  industries  wielded  prime  influence.  They  ad- 
vanced hand  in  hand.  Both  of  them  bore  directly  upon  the 
approach  of  the  Civil  War. 

The  prime  influence  of  internal  and  oversea  transportation 
in  promoting  the'  cultivation  of  cotton  is  visible  both  in  the 
gross  statistics  and  in  the  local  distribution  of  this  industry.  In 
the  first  years  of  our  national  history  little  is  known  as  to  our 
production  of  cotton.  Even  the  records  of  export  to  England 
are  untrustworthy,  because  of  the  frequent  transshipment  from 
our  seaports  of  cotton  grown  in  the  West  Indies.  But  it  is 
reasonably  sure  that  exportation  of  cotton  began  only  in  1787, 
increasing  thereafter  to  thirty  times  as  much  in  1793.  The 
figures  as  to  later  growth  are  tabulated  below. 

As  to  the  distribution  of  cotton-culture,  Bogart  says: 

"At  the  time  of  Whitney's  invention  [of  the  cotton-gin,  in 
1795]  cotton  was  raised  only  in  Georgia  and  South  Carolina; 
thence  it  spread  to  North  Carolina  and  Virginia  during  the 
early  years  of  the  nineteenth  century,  but  for  more  than 
twenty  years  it  was  confined  to  the  Atlantic  seaboard.  By 
1811  a  beginning  had  been  made  in  Tennessee  and  Louisiana, 
but  together  they  produced  but  one-sixteenth  of  the  cotton 
raised  in  the  United  States.  .  .  .  By  1821  these  four  States 
[Tennessee,  Alabama,  Mississippi  and  Louisiana]  raised  one- 
third,  by  1831  nearly  one-half,  and  by  1834  over  two-thirds 
of  the  cotton  grown  in  the  United  States." 


THE   APPROACH  9 

But  it  is  not  appreciably  by  reason  of  soil,  nor  by  mere 
parallelism  with  the  western  spread  of  settlement,  that  these 
States  became  pre-eminent  in  cotton-culture.  It  is  because  they 
are  pre-eminently  the  States  of  cheap  internal  transportation. 

A  commodity  like  cotton,  bulky  in  form  and  limited  to  one 
short  season,  cannot  well  support  railroads.  These  must  be 
supplied  with  traffic  fairly  evenly  the  year  around,  in  order 
to  pay  interest  upon  investment  in  track  and  other  plant.  Nor 
is  it  practicable  to  carry  cotton  far  by  wagon.  But  the  many 
sluggish  rivers  of  the  South,  with  their  cheaply  built,  light- 
draft  steamboats,  burning  cordwood  for  fuel,  formed  ideal  high- 
ways for  the  shipment  of  the  annual  crop  to  the  seaboard  with- 
out incurring  burdensome  charges  during  the  idle  season. 

Although  Fulton's  first  success  was  attained  on  the  Hudson 
in  1807,  it  was  not  until  1811  that  Nicholas  Eoosevelt  took 
the  first  steamboat  down  the  Ohio  and  Mississippi,  from  Pitts- 
burgh to  New  Orleans  and  return;4  and  this  is  just  the  year 
when,  according  to  Bogart,  a  "beginning"  in  cotton-culture 
had  been  made  in  the  interior  States.  For  the  rivers  had 
afforded  meager  means  of  transportation,  enough  to  start  the 
industry,  before  steam  came  to  the  aid  of  the  flatboatmen.  In 
1820  (also  according  to  Bogart)  it  took  only  ten  days  for  the 
full  length  of  these  rivers  going  down,  and  thirty-five  days 
coming  up;  and  during  this  interim  of  nine  years  the  cotton- 
culture  of  these  interior  States  had  grown  eightfold.  Savannah, 
Mobile  and  New  Orleans  were  seaports  early  shipping  large 
quantities  of  cotton  to  New  and  Old  England,  and  they  were 
fed  chiefly  by  their  river-traffic. 

Railroads  were  being  built  throughout  the  South,  it  is  true, 
during  the  decades  following  the  start  in  this  line,  and  they 
accentuated  the  growth  due  to  river-navigation.  The  first  steam 
passenger-railroad  in  America  was  built  in  South  Carolina  in 
1830.  But  up  to  the  time  of  the  Civil  War  the  influence  of 
the  railroads  was  much  less  marked  than  that  of  the  rivers. 

Thus  river-travel  grew  rapidly  into  a  great  institution,  creating 
as  it  went  a  new  school  of  marine  architecture  and  engineering 
which  has  since  been  copied  in  all  the  continents.  It  was  then 
surrounded  by  a  halo  of  prosperity,  racing,  gambling,  romance 
and  risk  of  boiler-explosion  or  conflagration  which  forms  one 
of  the  most  picturesque  and  tragic  of  all  aspects  of  our  early 
^Thurston,  " Growth  of  the  Steam-engine." 


10  MODERN   ECONOMIC   TENDENCIES 

history.     Unfortunately,  no  reliable  statistics  remain  as  to  the 
aggregate  of  this  river-tonnage  during  the  early  decades. 

TABLE  1 

POUNDS  OP  COTTON  RAISED,  PER   INHABITANT  PER  ANNUM,  1790-1915 
Averaged  for  Periods  of  about  Five  Years  Each.     For  the  United  States 


1790. 

3.8 

1832-36.  . 

28.7 

1862-66 

16  9 

1892-96. 

55.6 

1795  

9 

1837-41.. 

36  9 

1867-71  .  . 

32.0 

1897  -01  i 

.  68*8 

1800  

6.6 

1842-46.. 

43  4 

1872-76  . 

39.9 

1902-06. 

.  69.1 

1805-09.. 

12.2 

1847-51.. 

44.7 

1877-81.. 

48.3 

1907-11. 

.  67.4 

1810-25.. 

.... 

1852-56.. 

48.7 

1882-86.. 

51.3 

1912-15. 

.  70.2 

1826-31.. 

22.3 

1857-61.. 

57.1 

1887-91.. 

59.4 

The  steady  growth  in  rate  of  cotton-raising  per  capita,  except 
where  interrupted  by  the  Civil  War,  will  be  seen  at  a  glance 
from  Table  1.  It  is  stated  in  pounds  of  cotton  raised  per 
annum  per  capita  of  the  entire  United  States — not  as  a  measure 
of  individual  productivity  in  the  States  growing  cotton,  but 
as  one  of  average  individual  supply  throughout  the  entire 
nation. 

Per-Capita  Data. — For  it  is  the  prime  purpose  of  this  work 
to  investigate  the  facts  bearing  upon  the  average  welfare  of  each 
individual  citizen;  and  for  this  purpose  the  first  requisite 
is  knowledge  as  to  the  average  supply  of  the  material  means 
for  life  and  comfort  per  individual  throughout  our  entire  terri- 
tory— which  is  constituted  a  single  economic  unit  by  its  internal 
free  trade — and  throughout  as  much  of  its  history  as  can  be 
brought  under  exact  analysis.  For  population  is  growing  so 
rapidly  that  gross  statistics  mean  little,  or  may  actually  mis- 
lead. What  is  needed  is  a  reduction  of  the  vast  intricacy  of 
our  economic  and  industrial  problems  to  the  simplest  possible 
terms,  namely,  each  individual's  daily  life  and  wants;  and  this 
can  be  accomplished  only  with  data  reduced  to  a  per-capita 
basis. 

Thus  the  thing  of  prime  importance  shown  by  Table  1  is 
the  virtually  steady  growth  in  the  supply  of  cotton  to  each 
person,  on  the  average.  This  has  occurred  in  spite  of  our 
phenomenal  growth  in  population,  and  in  spite  of  the  general 
retreat  of  agriculture  in  proportion  to  the  other  arts,  and  of 
cotton  in  proportion  to  other  staples.  We  each  of  us  now  have 
available  for  our  enjoyment  much  more  cotton  than  in  the 
palmiest  days  of  "King  Cotton"  before  the  Civil  War;  but  we 


THE   APPROACH  11 

have  ceased  to  have  our  lives  and  institutions  vitally  affected 
thereby,  because  it  is  no  longer  the  basis  of  a  huge  enterprise 
for  the  exploitation  of  cheap  slave-labor. 

The  point  of  only  secondary  importance  in  this  striking 
record  of  cotton-culture  is  the  marked  influence  upon  it  of 
power-ginning,  of  steam-transportation  and  of  steam-driven  tex- 
tile machinery.  The  cotton-gin,  appearing  in  1793-5,  the  steam- 
boat in  1807-12  and  the  railroad  in  the  eighteen-thirties,  each 
left  its  plainly  visible  mark.  Thus  at  the  very  beginning  of 
our  economic  evolution,  guiding  us  irresistibly  toward  our  first 
great  political  convulsion  due  to  economic  causes,  the  Civil 
War,  appears  that  factor  which  all  further  study  must  increas- 
ingly emphasize  as  the  prime  controlling  one  in  all  social  de- 
velopment: transportation  and  communication. 

For  the  steam-driven  textile  machinery  of  that  day  could  be 
used  profitably  only  in  New  or  Old  England,  and  chiefly  the 
latter.  In  this  way  the  importance  of  transportation  became 
accentuated;  for  the  cotton-mills  could  be  reached  cheaply  only 
as  ocean-going  steam-navigation  developed.  In  1819  the  first 
transatlantic  vessel  carrying  steam-engines  sailed  from  Savan- 
nah to  Liverpool  and  Petrograd;  but  her  paddle-wheels  were 
folding  ones,  made  largely  of  canvas,  and  her  engines  were  used 
only  a  small  portion  of  the  time.  Then  the  coal-consumption 
of  these  early  engines  was  too  enormous  to  permit  their  con- 
tinuous use,  even  had  there  been  no  fear  for  the  destruction 
of  the  paddles  by  the  waves.  Hence  the  experiment  was  not 
a  commercial  success.  It  was  not  until- 1837  that  transatlantic 
ships  relying  continuously  upon  steam  to  aid  their  sail-power 
came  into  use,  under  the  Cunard  family,  and  not  until  a  full 
half-century  later  that  it  was  found  practicable  to  dispense 
entirely  with  sails. 

Canals. — Another  immediate  effect  of  the  steamboat  was  the 
stimulation  of  canal-building,  which  had  been  a  practical  art 
since  1767,  at  latest.  This  was  done  not  so  much  in  the  hope 
of  using  steamboats  directly  upon  the  canals,  although  this 
was  considered,  but  because  the  traffic  made  available  by  the 
river  and  coastwise  steamboats  demanded  better  means  for  in- 
terior transportation  than  the  wagon;  for  the  railroad  was  not 
introduced  until  after  1830,  and  even  then  was  expensive  to 
build,  in  terms  of  its  limited  tonnage-capacity.  The  landmarks 
of  this  form  of  progress  are  the  opening  of  the  Erie  Canal 


12  MODERN   ECONOMIC   TENDENCIES 

(1817-25)  at  a  first  cost  of  over  ten  millions,  the  completion 
of  such  trunk-canals  as  the  Ohio  &  Erie  and  the  Miami  Canals, 
in  Ohio,  joining  Lake  Erie  with  the  Ohio  River,  in  1830-32, 
and  the  Chesapeake  &  Ohio  Canal,  opened  in  1839,  giving 
another  route  across  the  mountains  to  the  Middle  West. 

For  twenty  years  after  the  railroad  became  generally  adopted 
a  large  portion  of  all  rail-traffic  was  carried,  over  sections  of 
the  route,  by  canal.  There  were  no  through  rail-routes  until 
after  the  Civil  War.  Between  the  Susquehanna  River  and 
Pittsburgh  the  only  portion  of  what  is  now  the  trunk-line  of 
the  Pennsylvania  Railroad  was  the  cable-hauled  inclined-plane 
railway  over  the  summit  of  the  mountains;  the  rest  was  all 
canal.  The  traveler  of  to-day  may  still  see  from  his  dining-car 
window  remnants  of  the  canals  on  which  his  grandfather  of 
1850,  when  traveling  nominally  by  rail,  must  have  spent  days 
and  nights  in  a  canal-boat  to  cover  what  the  grandson  now 
passes  in  as  many  hours. 

As  late  as  1854  the  total  length  of  canals  in  operation  was 
almost  one-third  of  that  of  the  railroads.  Canal-traffic  did  not 
decline  to  the  point  of  open  surrender  to  the  railroads  until 
the  time  of  the  Civil  War — that  great  stimulator  of  so  many 
changes  in  our  industrial  and  financial  ways. 

Indeed,  for  passenger-service,  the  canals  were  far  more  com- 
fortable than  the  early  railroads,  while  their  greater  cheapness 
for  bulky  commodities  was  obvious.  It  was  in  speed  alone,  that 
they  failed.  The  pictures  which  have  come  down  to  us  of 
summer  travel  by  canal,  with  the  passengers  seated  in  groups  in 
comfortable  chairs  on  the  broad  decks,  enjoying  the  quiet  coun- 
try beauty  all  around,  suggest  a  pang  of  regret  even  in  com- 
parison with  the  palatial  comforts  amidst  which  we  are  hurled 
through  the  land  by  the  modern  railroad,  too  rapidly  to  see 
it.  In  comparison  with  the  inconceivably  rough  and  dirty 
service  of  the  early  railroads,  with  the  chance  of  a  "snake- 
header"  end  of  a  loose  rail  coming  up  through  the  floor  of  the 
car  at  any  moment,  to  maim  or  kill,  in  addition  to  the  frequent 
collisions  and  horrible  burnings  of  wrecks,  canal-travel  must 
have  been  a  thing  very  hard  for  our  forefathers  to  relinquish 
for  the  sake  of  speed. 

Western  River-traffic. — As  to  traffic  on  our  western  rivers  no 
exact  data  are  available,  nor  as  to  total  tonnage  in  commission; 
but  the  tonnage  built  each  year  is  known.  It  is  stated  in 


THE   APPROACH 


13 


Table  2,  in  which  all  but  the  first  item  are  averages  for  five- 
year  periods.  All  columns  of  Table  2,  except  the  last,  refer 
to  the  Mississippi  River  alone.  The  last  column  includes  its 
tributaries.  From  these  figures  it  becomes  plain  that  western- 
river  steamboat-building  fell  from  its  maximum  before  the  war, 
as  a  result  of  railroad-competition,  and  not  as  a  result  of  the  war 
itself.  It  is  also  noticeable  that  the  war  brought  no  immediate 
paralysis  of  steamboat-building;  but  much  of  the  new  tonnage 
must  have  been  used  for  military  purposes. 

TABLE  2 
RIVER-STEAMBOATS  BUILT  PER  MILLION  INHABITANTS,  1815-1915 


All 

Year.    Tons. 

Year.    Tons. 

Year.    Tons. 

Year.    Tons. 

Western 
Rivers. 

1815          128 

1836-40    890 

1861-65    916 

1886-90     181 

1816-20    275 

1841-45     926 

1866-70    768 

1891-95     155 

1821-25     190 

1846-50  1133 

1871-75    609 

1896-00     161 

214 

1826-30    445 

1851-55  1250 

1876-80    520 

1901-05     106 

151 

1831-35    506 

1856-60    990 

1881-85    361 

1906-10      54 

71 

1911-15     .  .  . 

68 

Lake  and  Ocean  Shipping. — The  country's  growth  in  ship- 
ping on  the  ocean  and  the  Great  Lakes  proceeded  as  stated  in 
Table  3.  The  first  steamboat  of  the  Great  Lakes  was  launched 
in  1816  (Thurston). 

The  noticeable  features  in  Table  3  are  the  continuous  and 
marked  decline  in  our  foreign  shipping  under  the  American 
flag  (until  stimulated  by  the  Great  War  of  1914),  the  virtual 
constancy  of  our  coastwise  and  fishing  fleets  per  capita,  and 
the  tremendous  increase  in  internal  shipping  on  the  Great 
Lakes.  The  momentary  drop  in  the  fourth  column  between 
1870  and  1880  is  due  merely  to  a  change  in  the  classification. 
It  is  also  to  be  noted  that  the  actual  growth  on  the  Great  Lakes 
is  not  so  large  as  that  indicated,  because  an  increasing  portion 
of  the  tonnage  of  recent  years  has  been  in  coal  and  iron-ore, 
cargoes  which  figure  tonnage  per  dollar  of  value  far  beyond  the 
average  for  general  merchandise. 


14  MODERN   ECONOMIC  TENDENCIES 

TABLE  3 

FOREIGN,  COASTWISE  AND  GREAT-LAKE  SHIPPING 
Tonnage  per  Ten  Thousand  Inhabitants,  1800-1915 


Foreign 

Coastwise 

Through 

Year. 

Trade  and 

Trade  and 

Great  Lakes. 

Sault  Ste. 

Whaling. 

Fishing. 

Marie  Canal.5 

1800 

1263 

569 

1810 

1341 

608 

1820 

643 

685 

3.6 

1830 

448 

477 

8  6 

1840 

527 

750 

31.8 

1850 

684 

841 

85  4 

1860 

810 

892 

148 

12.8 

1870 

393 

708 

177 

17.9 

1880 

270 

551 

132 

34.6 

1890 

150 

552 

169 

134 

1900 

108 

568 

205 

292 

1910 

86 

730 

315 

542 

1915 

185 

645 

279 

558 

6  This  column  gives  tonnage  passing;  all  other  columns  tonnage  afloat. 

American  Merchant  Marine. — In  view  of  the  widespread 
editorial  and  stump-speech  complaint  over  the  decline  of  our 
ocean-carrying  trade  under  the  American  flag,  with  agitation 
for  the  governmental  subsidy  of  American-registry  shipping — 
a  topic  sure  to  revive  with  renewed  virulence  after  the  war — 
it  is  particularly  to  be  noted  that  the  second  column  of  Table  3 
bears  no  visible  relation  to  the  evolution  of  our  foreign  trade. 
This  last  has  increased  fairly  steadily  per  capita,  however  it  may 
have  been  carried  in  foreign  ships. 

To  throw  light  upon  this  matter  Table  4  gives  the  figures 
as  to  our  total  imports  and  exports,  including  gold  and  silver, 
with  the  excess  of  either  imports  or  exports  stated  as  a 
percentage  of  the  whole  afterwards.  Unfortunately  these  data 
appear  in  terms  of  dollars  of  valuation,  instead  of  in  mass  of 
commodities,  which  breaks  the  rule  for  this  book;  but  this  is 
inevitable  in  this  case. 

All  figures  in  Table  4  except  the  first  and  the  last  state  the 
average  for  the  decade  extending  on  either  side  of  the  year 


THE    APPROACH 


15 


stated.     The  first  figure  gives  the  average  for  the  years  1790- 
95  and  the  last  that  for  1906-12. 

If  "the  disappearance  of  our  flag  from  the  seas"  has  had 
any  detrimental  influence  upon  the  volume  or  direction  of  our 
foreign  trade  per  capita,  it  is  certainly  not  apparent  from  the 
statistics.  Taking  the  figures  as  they  stand,  the  lowest  for 
the  122  years  is  that  for  1840.  But  this  is  just  the  time  when 
the  American  clipper-ship  reached  the  very  zenith  of  its  pros- 
perity, when  the  American  flag  floated  most  prominently  and 
commanded  relatively  the  highest  rates  in  the  most  distant 
ports! 

TABLE  4 

TOTAL  IMPORTS  AND  EXPORTS   (INCLUDING  GOLD  AND  SILVER)   WITH 
EXCESS  PERCENTAGES,  1790-1912 

(Dollars  per  Capita  per  Annum) 


Year.               Imports. 

Year.               Imports. 

Year.             Exports. 

1790    $16.30     13.5% 
1800      29.50      8.8 
1810      17.80     16.3 
1820      17.80      7.8 

1830    $14.50    7.7% 
1840      13.90    3.7 
1850      17.10     1.7 
1860      19.20    0.3 
1870      26.00    2.4 

1880    $27.90     10.6% 
1890      27.10      6.0 
1900      31.10     19.5 
1910      39.20     13.0 

Conversely,  the  highest  figure  is  that  for  1910,  when  American 
registry,  as  shown  by  Table  3,  was  almost  at  its  lowest  ebb. 
Yet  the  volume  of  trade  (per  capita)  for  that  decade  is  almost 
three  times  that  for  1840. 

Moreover,  the  balance  of  trade  during  that  entire  period 
drifted  markedly  toward  that  side  of  the  ledger  which  economists 
generally  regard  as  in  our  favor.  In  recent  decades  the  large 
excess  of  imports  over  exports  which  prevailed  at  the  time  of 
our  national  birth  has  been  reversed,  during  the  very  period 
when  our  flag  was  gradually  disappearing  from  the  seas,  into 
an  equally  large  excess  of  exports  over  imports ! 

In  reality  the  figures  may  not  be  taken  quite  as  they  stand, 
for  they  record  only  valuations,  and  hence  need  interpretation 
in  terms  of  the  general  scale  of  prices  prevailing  at  each  period 
stated ;  but  this  will  alter  merely  the  degree,  and  not  the  nature, 


16  MODERN   ECONOMIC   TENDENCIES 

of  the  deductions  enforced.  The  contrast  of  Table  4  will  still 
show  that  our  foreign  commerce  per  capita  has  increased  fairly 
continuously  with  time,  as  the  several  continents  became  more 
and  more  closely  united  by  the  steamship,  the  cable  and  the 
wireless,  and  quite  independently  of  what  flag  might  fly  above 
the  carriers. 

The  reasons  for  the  decline  of  American  registry  are  simple 
and  natural,  and  have  nothing  to  do  with  our  economic  pros- 
perity, either  internal  and  external.  These  reasons  are  quite 
in  parallel  with  our  economic  development  in  other  industries 
than  ocean-carrying.  They  are  these: 

In  the  old  days  of  sails,  speed,  which  was  and  is  the  prime 
factor  in  determining  both  costs  and  profits,  depended  primarily 
upon  the  skill  of  the  skipper.  Merchant-navigation  was  then 
much  like  a  modern  yacht-race.  In  those  days  the  sailor  who 
knew  how  to  crack  on  sail,  night  as  well  as  day,  without  losing 
a  lot  of  costly  top-hamper  to  every  squall  which  blew  in  out  of 
the  darkness,  could  make  the  long  voyages  in  much  less  time 
than  others.  Sail  must  be  carried  to  the  last  possible  moment; 
and  a  proverb  among  mariners  runs  to  the  effect  that^"any 
lubber  can  spread  canvas,  but  it  takes  a  sailor  to  shorten  sail/' 
In  the  China-trade  of  clipper-days  American  bottoms  often 
commanded  twice  the  freight-rates,  in  competition  with  other 
nationalities,  just  because  of  the  combination  of  skill,  daring 
and  alert  good  judgment  typical  of  American  commanders,  in 
seas  almost  devoid  of  aids  to  navigation. 

Therefore  in  those  days  navigation  was  justly  and  naturally 
a  profession  of  prominence  and  honor.  The  young  men  of  the 
best  families  officered  and  part-owned  our  merchant  marine. 
But  they  almost  universally  retired  from  so  arduous  a  vocation 
before  the  age  of  forty.  In  colonial  days  at  least  one  instance 
is  reported  of  a  ship  sailing  the  twenty-months'  voyage  to  the 
China  seas  with  every  officer  on  board  still  in  his  teens. 

The  whole  thing  was  an  adventurous  gamble — against  weather, 
uncharted  seas,  pirates,  and  fluctuating  and  unknown  markets; 
but  a  gamble  in  which  skill  and  courage  played  a  large  part. 
Both  profits  and  losses  were  commensurate  with  those  custom- 
ary in  Wall  Street  to-day.  A  cargo  of  pepper  landed  at  Salem 
in  the  eighteenth  century  is  said  to  have  netted  a  profit  equal 
to  four  times  the  entire  cost  of  the  ship  and  the  voyage. 

But  now  all  this  has  been  changed.    The  speed  of  a  modern 


THE   APPROACH  17 

steam-freighter  has  been  determined  for  her  beforehand  by 
her  designers.  Neglect  or  stupidity  in  the  engine-room  can 
spoil  it,  of  course;  but  skill  on  the  bridge  cannot  mend  it. 
Navigation,  as  a  profession,  has  been  reduced  to  computing  ob- 
servations by  rule  of  thumb,  and  counting  engine-revolutions 
from  one  to  another  of  the  lighthouses  and  light-ships  which 
dot  our  shores  and  coastal  waters  like  lamp-posts  on  a  street. 
All  distinctive  honor  and  appreciable  profit  have  passed  out  of 
the  hands  of  the  commander. 

Competition  now  succeeds  or  fails  in  the  offices  ashore,  not 
on  the  high  seas.  The  profit  goes  to  the  owner  having  skillful 
commercial  judgment  and  alertness  in  watching  a  market  re- 
ported hourly  to  him  from  Argentina  to  Manchuria,  rather  than 
to  anyone  possessing  mere  nautical  efficiency. 

Whether  the  ship  be  sailed  under  domestic  or  foreign  flag 
is  little  more  than  empty  sentiment.  It  has  nothing  to  do  with 
our  supply  of  carriers.  Our  ports  will  always  be  filled  with  all 
the  bottoms  for  which  cargos  are  offered.  The  unusual  demand 
for  ships  occasioned  by  the  present  war  has  brought  into  New 
York  harbor  flags  from  South  America  and  Asia  which  were 
all  but  strangers  to  the  most  experienced  marine  authorities. 
The  profits  made  in  using  them  will  go  to  the  owners — or  to 
those  clever  enough  to  control  them  temporarily,  through  charter 
— whatever  the  flag  flown.  Conversely,  if  the  ship  be  owned 
abroad  the  profits  will  go  abroad,  in  spite  of  stars  and  stripes 
floating  above  the  taffrail. 

It  is  just  as  natural  and  inevitable,  under  modern  conditions, 
that  our  ships  should  be  officered  by  middle  class  Scandinavians 
as  it  is  that  our  steel-mills  should  be  manned  by  Slav  laborers 
and  superintended  by  technical  Teutons — while  the  ownership, 
control,  enterprise  and  profits  all  remain  in  American  hands 
in  both  cases.  Americans  are  better  occupied  in  the  commercial 
offices  at  home,  it  should  be  plain,  than  they  would  be  com- 
manding tramp-freighters  in  the  far  seas. 

Yet,  if  the  navigators  and  crew  be  foreign-born,  what  pride 
may  we  take  in  the  fact  that  our  flag  is  flown?  Our  satisfac- 
tion over  our  supremacy  in  international  yacht-racing,  for  in- 
stance, needs  be  tempered  by  the  fact  that  nearly  every  winning 
American  boat  has  been  skippered  and  manned  by  foreign  talent. 
Only  for  the  design  is  credit  due  to  us. 

Railroads. — The  growth  of  steam-transportation  on  land  has 


18  MODERN   ECONOMIC   TENDENCIES 

progressed  more  slowly  and  with  greater  difficulty  than  that  by 
water.  Although  steam-locomotives  came  into  use  for  hauling 
coal  wagons  (on  the  same  railroads  with  horses),  soon  after 
the  appearance  of  the  first  practicable  steamboat,  in  1807,  yet 
it  was  not  until  almost  1830  that  Stephenson  attained  his 
dramatic  triumph  with  the  famous  "Kocket,"  and  established 
the  railroad,  which  had  long  been  used  for  freight,  as  a  thing 
properly  to  be  operated  exclusively  by  steam,  and  fit  for  pas- 
senger-traffic. 

For  it  is  difficult  now  for  us  to  realize  how  gradually  the 
modern  combination  of  fairly  level  railroad,  steam-locomotion 
and  passenger-coaches,  now  so  familiar  and  universal,  came  into 
recognition,  after  a  long  previous  history  of  each  as  a  separate 
appliance.  Before  about  1840  the  railroad,  as  a  means  merely 
for  aiding  the  horse-traction  of  goods-wagons  (chiefly  for  coal 
or  stone),  and  the  steam-locomotive,  then  regarded  as  merely 
a  competitor  of  the  horse-drawn  stage-coach  on  ordinary  high- 
ways, had  developed  quite  independently.  In  fact,  the  railroad 
had  developed  fairly  completely  from  thirty  to  forty  years  ahead 
of  the  locomotive.  What  is  said  to  be  the  first  railroad  in 
America  ran  from  granite-quarries  of  Quincy,  Mass.,  down  to 
tide  water  on  the  Neponset  Eiver,  and  is  said  to  have  been  in 
operation  (with  horses,  of  course)  during  the  Revolution.  Yet 
no  steam-locomotive  was  in  use  in  Massachusetts  until  in  the 
eighteen-thirties. 

Conversely,  the  locomotive,  when  it  did  appear  (which  was  in 
England,  about  1814)  was  accepted  without  question  as  be- 
longing as  much  to  the  highways,  to  compete  there  with  horses 
in  maintaining  the  passenger-traffic  (which  had  never  dreamed 
of  boarding  the  slow,  rough  and  dirty  railway-coal-cars),  as 
it  did  on  the  railroads,  where  it  would  be  equally  obliged  to 
compete  with  horses.  For  on  the  railroads  the  horses  had  the 
right-of-way  over  locomotives  by  nearly  a  half-century  of  prec- 
edence. On  the  highways  they  had  had  only  about  twice  that. 

Stephenson's  great  genius,  therefore,  lay  not  in  the  fact  that 
he  "invented"  the  locomotive,  although  he  added  to  it  features 
which  have  formed  a  part  of  its  success  down  to  the  present 
day;  for  the  locomotive  was  a  pretty  widely  used  machine  for 
a  dozen  years  before  he  touched  it — just  as  the  stationary  steam- 
engine  was  used  all  over  Europe  for  sixty  years  before  James 
Watt,  the  commonly  accredited  inventor  of  it,  began  his  ex- 


THE    APPROACH  19 

periments.  Stephenson's  great  achievement  was  to  see  that  the 
railroad  and  the  steam-locomotive  belonged  together,  each  being 
properly  built  to  suit  the  other,  while  horse-drawn  individual 
carriages  belonged  exclusively  on  the  high-roads. 

For  at  that  time  the  general  expectation  from  steam-power, 
when  applied  to  land-transportation,  had  been  that  it  should 
replace  horses  in  the  private  carriages  of  the  highways,  just  as 
marine  steam-power  had  replaced  oars  and  sails,  without  other 
alteration  in  the  industry.  And  the  art  had  made  surprising 
progress  in  that  direction.  It  is  somewhat  startling  to  one 
who  has  taken  for  granted  that  the  automobile  is  a  product 
only  of  the  twentieth  century  to  learn  that  in  1834-5  there  were 
a  half-dozen  commercial  lines  of  steam-propelled  omnibuses 
running  in  and  about  London,  extending  even  so  far  as 
Brighton,  sixty  miles  away. 

But  even  Stephenson's  mechanical  triumph,  in  his  improve- 
ments over  previous  or  competing  locomotives,  did  not  earn  for 
him  an  easy  or  immediate  recognition.  Both  popular  prejudice 
and  vested  interests  fought  hard,  in  Parliament  and  out.  It  was 
not  until  fully  1840  that  the  graded  railroad,  fit  for  high-speed 
locomotives  drawing  long  strings  of  carriages  without  toothed 
drivers,  first  won  out  in  the  battle  against  the  traditional  be- 
lief in  the  single  stage-coach  as  the  natural  interurban  vehicle, 
whether  propelled  by  horse  or  by  steam.  It  was  not  until  late 
in  the  eighteen-fifties  that  the  Pennsylvania  Railroad  had  cut 
out  the  last  of  its  inclined  planes  and  stretches  of  canal  between 
Philadelphia  and  Pittsburgh,  running  trains  right  through  by 
means  of  locomotives,  over  grades  which  they  could  pull  with- 
out dependence  upon  cable  or  rack-and-gear — reducing  the  time 
of  transit  from  three  or  four  days  in  1835  to  less  than  twenty 
hours  of  comparative  comfort. 

Quoting  Bogart: 

"About  1850  Mr.  Henry  C.  Carey  wrote:  'Twelve  years 
since  the  fare  from  Chicago  to  New  York  (1500  miles  by  lake 
and  rail)  was  $74.50.  It  is  now  but  $17.' ?; 

The  last  twelve  years  preceding  the  publication  of  this  present 
book  show  no  advance  in  facility  of  communication  at  all  com- 
parable with  this.  The  development  of  the  automobile  and  the 
airplane  have  been  marvelous,  but  they  have  not  cheapened 
transportation  or  communication  appreciably,  if  at  all. 


20 


MODERN  ECONOMIC  TENDENCIES 


Figures  as  to  the  growth  of  our  railroad-system  in  mileage 
are  given  in  Table  5.  As  before,  we  are  not  interested  in  the 
gross  mileage,  but  only  in  that  per  million  inhabitants;  for 
this  alone  is  a  true  measure  of  the  degree  to  which  people  have 
been  aided  in  living,  as  the  country  grew,  by  increasing  access 
to  railway-facilities.  The  mileage  is  stated  for  the  median  year 
of  the  period  stated,  while  the  annual  rate  of  increase  is 
averaged  over  the  period. 

The  figures  up  to  1892  refer  only  to  main-line  track.  Those 
since  1892  include  also  sidings;  and  since  progress  of  late  has 
been  chiefly  in  the  expansion  of  terminal  facilities,  rather  than 
the  building  of  new  lines,  this  is  only  a  fair  way  to  state  it. 

TABLE  5 
RAILWAY-FACILITIES  IN  THE  UNITED  STATES,  1830  TO  1914 


Period 

Mileage 
per  Million 
Inhabitants 

Rate  of 
Increase, 
Per  Cent 
per  Annum 

Period 

Mileage 
per  Million 
Inhabitants 

Rate  of 
Increase, 
Per  Cent 
per  Annum 

1830 

3 

1872-77 

1670 

4.0 

1832-37 

73 

89*0 

1877-82 

1860 

2.2 

1837-42 

165 

17.7 

1882-87 

2268 

4.1 

1842-47 

231 

7.0 

1887-92 

2657 

3.2 

1847-52 

389 

11.0 

1892-97 

3352 

6 

1852-57 

673 

11.6 

1897-02 

3390 

0.2 

1857-62 

974 

7.7 

1902-07 

3664 

1.6 

1862-67 

1002 

0.6 

1907-12 

3820 

0.8 

1867-72 

1372 

6.5 

1912-14 

3898 

1.0 

6  Change  in  classification. 

These  figures  show  the  enormous  growth  in  transportative 
facilities  in  use  for  the  support  of  each  individual.  The  average 
citizen  to-day  makes  use  of,  or  "consumes,"  as  a  part  of  his 
daily  needs  and  luxuries,  over  two  hundred  times  the  amount 
of  transportation,  measured  merely  in  miles  of  railway-track, 
as  compared  with  the  average  citizen  during  the  childhood  of 
men  still  living.  Measured  in  ton-miles  or  passenger  miles,  and 
including  electric-railway  and  other  forms  of  transportation,  the 
actual  contrast  is  far  greater  still. 


THE  APPROACH  21 

Life  and  Transportation. — This  is  the  one  most  significant 
fact  of  modern  social  life,  in  its  mechanical  aspect.  The  funda- 
mental importance  of  our  present  reliance  upon  transportation 
and  communication,  to  supply  daily  food,  shelter  and  work  for 
tens  of  millions  who  otherwise  never  could  have  been  born — 
or  who,  having  already  been  born,  must  die  soon  after  this 
transportation  is  interrupted — cannot  be  over-emphasized. 

Therefore  it  is  absurd  to  assume  that  the  hundred  millions  of 
people  now  cemented  together  by  our  present  intensity  of  com- 
munication do  not  need  a  form  of  social  organization  basically 
different  from  the  population  one-seventh  as  great,  using  but 
one-fiftieth  of  the  modern  amount  of  railway-mileage  per  in- 
dividual, of  1832,  the  earliest  year  in  which  the  railroad  had 
become  a  social  factor.  Still  less  is  it  reasonable  to  expect 
modern  economic  conditions  to  be  met  by  the  simple  political 
formulas  of  a  generation  earlier  still,  when  communication  was 
far  more  crude  than  in  1832. 

Not  only  is  the  mileage  of  track  in  use  significant,  but  also 
the  widely  varying  rate  at  which  this  mileage  has  been  built, 
shown  also  in  Table  5.  Between  this  rate  and  the  degree  of 
commercial  prosperity  prevailing  at  the  time  there  is  a  close 
connection.  At  the  same  time,  it  is  only  natural  to  find  a 
continual  decrease  in  this  rate  of  addition  to  our  track-facilities, 
as  the  country  became  properly  provided.  Our  later  development 
has  been  directed  more  toward  a  more  intensive  use  of  what 
track  we  have.  Nevertheless,  up  to  the  latest  hour  concerning 
which  we  have  data,  we  are  still  increasing  our  trackage  faster 
than  our  population. 

Intensity  of  Railway-traffic.— This  increase  in  intensity  of 
traffic,  while  it  has  been  active  from  the  beginning,  can  be 
traced  statistically  only  during  recent  years.  Of  the  several 
means  for  measuring  this  growth  amongst  which  selection  must 
be  made,  the  one  chosen  as  the  best  indicator  is  the  aggregate 
locomotive  heating-surface  of  the  country.  Other  things  being 
equal,  the  power  of  a  locomotive  is  proportional  to  its  heating- 
surface.  Data  as  to  number  and  size  of  cars  moved  would  show 
approximately  the  same  rate  of  growth,  but  are  not  so  accurate  a 
measure  of  traffic  as  heating-surface.  For  value  as  well  as 
weight  of  freight  must  be  considered,  and  power  includes  both 
items;  because  the  higher  priced  freight,  as  a  rough  rule,  is 


22 


MODERN  ECONOMIC  TENDENCIES 


moved  with  a  speed  proportional  to  its  value,  and  speed,  as 
well  as  weight,  calls  for  power. 


TABLE  6 

RELATIVE  GROWTH  OF  RAILWAY  MILEAGE  AND  LOCOMOTIVE  POWER  PER 
CAPITA,  1904  TO  1914 


Year 

Single-track 
Mileage 

Aggregate  Locomotive 
Heating-surface 

Rate  of  Increase, 
Per  Cent 

1904 

1000 

1000 

1905 

1012 

1055 

5.5 

1906 

1026 

1165 

10.5 

1907 

1040 

1278 

9.7 

1908 

1039 

1327 

3.9 

1909 

1046 

1328 

0.1 

1910 

1055 

1385 

4.2 

1911 

1069 

1462 

5.6 

1912 

1073 

1501 

2.7 

1913 

1077 

1579 

5.2 

1914 

1079 

1625 

3.0 

Table  6  gives  the  comparative  rates  of  growth  in  mileage 
and  locomotive-power  per  capita  since  1904.  Since  relative 
rather  than  absolute  rates  of  growth  are  what  interest  us  here, 
the  figures  are  all  stated  in  terms  of  1000  as  the  arbitrary 
standard  for  the  year  1904 — except  in  the  case  of  the  last 
column,  which  gives  ordinary  percentages. 

Since  1904  the  increase  in  locomotive-power  per  capita. has 
been  eight  times  that  of  the  mileage  per  capita.  Since  the 
Cuban  War  the  locomotive-power  available  for  the  support  of 
each  citizen  has  been  virtually  doubled. 

Railway-accessories. — Returning  to  the  broader  aspect  of  the 
railroad  in  its  relation  to  the  material  growth  of  the  nation, 
five  most  important,  if  not  absolutely  essential,  features  had 
to  be  added  to  the  railway-system  with  which  the  wilderness 
had  been  penetrated,  up  to  about  1870,  before  the  great  fertile 
territory  of  the  Middle  West — not  to  mention  the  mineral 
treasures  of  the  Rocky  Mountains,  the  lumber  of  the  Sierras 
and  the  fruit-supplies  made  available  by  irrigation  in  the  valleys 
of  the  Pacific  coast — could  be  reached  from  the  Atlantic  seaboard 


THE  APPROACH  23 

in  what  might  be  called  comparative  speed,  ease  and  comfort. 
These  features  were : 

(1)  The  sleeping-car; 

(2)  The  air-brake; 

(3)  The  modern  coupler  and  buffer,  developed  later  into  the 

vestibule ; 

(4)  Steam-heat,  and 

(5)  The  modern  signal-system. 

All  of  these  innovations  appeared  soon  after  the  Civil  War, 
coincidently  with  the  extension  of  rails  across  the  plains  and 
mountains  to  the  Pacific,  in  1869,  although  the  general  adop- 
tion of  steam-heat  was  slower  than  the  others.  Without  the 
modern  coupler  a  parlor  or  sleeping-car  could  not  have  been 
made  appreciably  more  restful  to  the  passenger  than  a  freight- 
car.  Without  the  air-brake  speeds  could  never  have  approached 
modern  figures.  Locomotives  could  easily  be  built  with  power 
enough  to  draw  the  trains  rapidly,  but  without  prompt  and 
powerful  brakes  such  speeds  would  insure  only  disaster.  Until 
steam-heat  was  adopted  the  frequent  horrible  holocausts  in- 
volved in  railway-accidents,  from  fires  started  by  the  "deadly 
car-stove,"  were  such  as  are  best  forgotten.  Without  modern 
signal  systems  the  growth  in  traffic  (per  mile  of  track)  just 
noted  would  have  been  quite  impossible. 

Inventional  Lag. — But  it  must  not  be  supposed  that  the  adop- 
tion of  useful  inventions  follows  always  immediately  upon  the 
date  of  their  introduction.  Their  success  may  be  steady,  and 
rapid  enough  to  mark  its  effect  statistically,  yet  there  is  much 
inertia  to  be  overcome.  In  textile  matters,  for  instance,  although 
the  power-loom  was  introduced  in  1790,  yet  far  into  the  nine- 
teenth century  the  use  of  hand-looms  still  prevailed  widely. 
Bogart,  quoting  from  Webster,  says: 

"In  1815,  when  cotton-cloth  was  still  woven  chiefly  by  hand 
— the  family-weaver  finishing  only  four  yards  of  cloth  per 
day — the  price  of  ordinary  cloths  for  sheeting  was  40c.  per 
yard.  In  1822  it  had  fallen  to  22c.,  and  in  1829  to  8i/2c. 
In  1850,  when  factory-manufacture  had  completely  abolished 
the  old-time  system  and  when  the  power-loom  was  in  full 
operation,  the  price  was  reduced  to  7c.  as  the  result  of 
machine-labor.  That  this  price  was  due  chiefly  to  machinery, 
and  not  so  much  to  a  fall  in  the  price  of  cotton,  is  evident 


24  MODERN   ECONOMIC   TENDENCIES 

from  a  comparison  of  the  prices  of  cotton  and  cloth.  ...  A 
mule-spinner  of  1830,  carrying  300  spindles,  could  be 
operated  by  a  single  person,  who  could  thus,  with  the  aid  of 
machinery,  accomplish  as  much  as  300  girls  spinning  by  hand 
a  single  thread  at  a  time  on  the  old-fashioned  spinning- 
wheel." 

The  same  is  true  of  agricultural  machinery,  a  line  of  inven- 
tion in  which  the  United  States  led  the  world  and  one  which 
had  a  vital  influence  upon  the  development  of  our  country 
during  the  first  half  of  the  nineteenth  century.  When  the  first 
cast-iron  plow  was  introduced,  in  1797,  it  was  disapproved  by 
the  farmers  on  the  score  of  its  "poisoning  the  soil,"  and  it  was 
not  until  about  1825  that  there  arose  any  general  tendency  to 
use  improved  agricultural  implements.  In  1834  McCormick 
brought  out  his  now  world-famous  reaper,  and  in  1837  the 
Pitts  brothers  their  threshing-machine.  The  decade  of  1840- 
50  witnessed  the  wide  introduction  of  plows  with  interchangeable 
parts,  soon  to  be  followed  by  the  use  of  chilled  iron  or  steel 
as  material. 

"Just  before  the  Civil  War  a  bushel  of  corn  represented 
more  than  270  minutes  of  human  labor,  at  a  cost  of  35% 
cents,  while  to-day  (1904)  the  same  amount  is  produced  with 
41  minutes  of  labor  for  10^  cents."  (Encyclopedia  Ameri- 
cana.) 

The  way  in  which  our  path  of  progress,  entered  by  such  strides 
as  these,  led  on  through  the  intricate  and  brilliant  record  of 
invention  which  characterized  the  last  half-century  must  be 
reviewed  briefly.  Reference  to  a  few  of  the  principal  land- 
marks will  suffice. 

Stationary  Power. — In  the  field  of  stationary  power,  which, 
after  transportation,  is  the  one  most  intimately  linked  with 
our  growth  in  material  prosperity,  the  first  of  these  land-marks 
is  the  invention  of  the  hydraulic  turbine,  about  1825.  This 
device  freed  the  water-powers  of  both  continents,  and  particu- 
larly those  of  our  own  New  England  states,  from  the  limitations 
of  the  old-fashioned  overshot  or  breast  wheel — slow,  cumbrous, 
and  narrowly  limited  in  its  ability  to  handle  high  heads  or  large 
flows  of  water. 

About  the  year  1850  appeared  the  drop-cut-off  steam-engine, 


THE   APPROACH  25 

in  the  hands  of  Sickels  and  Corliss,  reducing  the  intolerable 
steam-consumption  of  the  earlier  engines  so  that  they  could  be 
used  for  many  purposes  previously  impracticable.  There  are 
few  inventions  which  have  had  more  permanent  value  than  this, 
though  largely  unknown  to  the  public.  The  development  of 
New  England's  textile  industries  depended  largely  upon  it. 

Efficiency  versus  Economy. — Here  we  should  stop  a  moment 
to  consider  one  economic  effect  of  these  advances.  The  history 
of  coal-mining,  for  instance,  cannot  be  understood  without 
knowing  that  nothing  has  so  stimulated  the  gross  consumption 
of  coal  as  these  improvements  in  the  fuel-efficiency  of  the  steam- 
engine.  Each  additional  economy  in  the  use  of  fuel,  as 
measured  in  pounds  per  horsepower-hour,  immediately  made 
steam-power  available  for  a  wide  range  of  uses  from  which  it 
had  previously  been  debarred  by  its  cost  for  fuel.  Therefore 
the  number  of  horsepower  in  use  rose  much  more  rapidly  than 
the  fuel-rate  per  horsepower  fell — resulting  in  a  steady  increase 
in  the  gross  consumption  of  coal  for  power. 

While  this  was  true  of  every  step  in  advance  in  steam-en- 
gineering yet  it  had  its  most  marked  instance  in  marine  en- 
gineering, because  of  the  multiple  value  of  coal  on  board  ship 
(as  a  displacer  of  cargo),  in  addition  to  its  original  cost.  Hence 
there  is  no  one  item  in  the  evolution  of  technical  science  which 
has  so  increased  our  drafts  upon  our  coal-fields  as  the  invention 
of  the  compound  marine  engine,  which  all  but  halved  coal-rates 
per  horsepower. 

Nor  is  there  one  which  did  more  material  good,  for  all  these 
factors  grow  with  length  of  voyage.  Hence  the  compound  engine 
was  able  to  propel  ships  profitably  on  voyages  into  far  seas  where 
sail  alone  had  been  practicable  before. 

To  return  to  stationary  steam-power,  on  land,  about  1875 
entered  the  high-speed  automatic  steam-engine,  offering  the 
user  a  gain  in  the  way  of  space  and  first  cost,  in  both  of  which 
items  the  Corliss  engine  was  extravagant,  which  paralleled  the 
gain  in  current  fuel-consumption  made  available  by  the  Corliss. 
Both  types  have  had  a  wide  field  of  usefulness,  surrendering 
finally  their  leadership  to  the  steam-turbine  (coupled  with  the 
electric  generator)  during  the  last  years  of  the  nineteenth  and 
the  first  of  the  present  century. 

Gas  Power. — In  parallel  with  this  development  arose  the  use 
of  the  gas-engine.  Although  the  invention  of  illuminating-gas 


26  MODERN   ECONOMIC   TENDENCIES 

in  1801,  by  James  Watt's  assistant,  Murdock,  had  started  by 
1825  a  steady  creation  of  suggestions  on  paper  for  deriving 
power  from  gaseous  fuel,  yet  the  first  commercially  practicable 
machine  appeared  only  in  1860,  at  the  hands  of  Lenoir,  in 
France.  But  illuminating-gas,  which  was  first  distributed  in 
America  in  Baltimore  in  1816,  has  always  been  too  costly  to 
serve  as  a  basis  for  power  in  appreciable  quantities.  Up  to 
about  1890  engines  driven  thus  had  necessarily  been  confined 
to  small  units  for  isolated  purposes.  It  was  only  as  the  use  of 
"producers"  of  cheaper  fuel-gas  of  various  sorts,  in  which 
Dowson  was  a  pioneer,  became  common,  that  the  gas-engine 
became  an  appreciable  factor  in  our  material  development.  The 
discovery  of  its  usefulness  when  run  upon  the  waste-gases  from 
the  blast-furnace  as  fuel,  in  Belgium  in  1901,  and  the  wonder- 
ful development  of  gasoline-driven  engines  for  automobiles, 
motorboats  and  airplanes  since  that  year,  is  personally  familiar 
to  all  adults  of  to-day. 

The  Locomotive. — In  the  application  of  steam  to  land  trans- 
portation there  are  few  milestones  to  record.  The  locomotive 
itself  was  left  in  so  perfect  a  state  by  Stephenson,  and  by 
the  early  American  designers  who  concurrently  developed  the 
flexible  form  of  running-gear  adapted  to  our  rougher  roads 
and  heavier  traffic,  that  throughout  the  half-century  from 
1840  to  1890  there  was  virtually  no  change  except  in  dimen- 
sion. Since  then  the  introduction  of  compounding,  super- 
heating and  mechanical  stoking,  with  the  piston- valves  enforced 
by  higher  steam-pressures  and  the  radial  valve-gears  enforced 
by  the  crowding  of  more  power  within  the  unyielding  track- 
gage,  have  permitted  a  tremendous  increase  in  size  and  power 
of  machine,  with  corresponding  increase  in  train-load.  But 
aside  from  these  features,  and  the  introduction  of  electric  trac- 
tion upon  a  few  lines  of  relatively  congested  traffic,  or  accessible 
to  cheap  mountain  water-power,  the  growth  of  the  railroad 
has  been  one  of  dimension  only. 

The  Marine  Engine. — In  marine  propulsion  the  advances  have 
been  more  spectacular.  The  substitution  of  the  screw-propeller 
for  the  paddle-wheel  by  John  Ericsson  (1845-60)  instituted  a 
marked  gain  in  the  appearance,  sea-worthiness  and  carrying- 
capacity  of  ocean-going  steamships.  The  introduction  of  the 
surface-condenser  and  the  compound  engine  (1860-70)  opened 
up  to  steam-traffic  distant  seas  hitherto  accessible  only  to  slow 


THE  APPROACH  27 

and  uncertain  navigation  by  sail,  and  insured  the  decline  of 
prosperity  for  the  world-famous  American  clipper-ships.  This 
conquest  by  steam  was  clinched  by  the  entry  of  the  triple- 
compound  engine,  in  1875. 

Not  even  the  steam-turbine,  invented  by  De  Laval  and  Par- 
sons in  the  eighteen-eighties,  and  which  reached  recognition  in 
marine  propulsion  about  the  year  1900,  has  yet  made  so  marked 
an  impression  upon  the  character  of  our  ocean-carriers  as  did 
these  earlier  inventions.  The  turbine  has  permitted  a  size  and 
speed  of  modern  passenger-liner  which  would  have  been  im- 
practicable without  it,  but  has  produced  no  other  alteration. 
For  freighters  of  moderate  size  the  Diesel  oil-engine  has  made 
some  splendid  records  in  low  fuel-consumption  in  voyages  of 
great  length,  but  to  date  it  has  not  excelled  the  geared  steam- 
turbine  in  general  advantages. 

The  Sailing-ship. — Each  advance  in  efficiency  or  power  of 
engine  diminishes  further  the  relative  importance  of  the  ap- 
parently dwindling  fleet  of  sailing-ships.  Yet  it  is  to  be  noted 
that  the  last  two  decades  have  witnessed  a  wonderful  advance 
in  the  building  of  huge  four  to  six  masted,  steel-hulled  sailers 
— schooner-rigged  for  coastwise  and  square  rigged  for  deep- 
water  voyages.  While  diminishing  relatively,  our  sailing-fleet 
may  be  holding  its  own  absolutely;  and  sail-power  is  a  very 
efficient  propeller  for  ships  carrying  bulky  cargo. 

As  to  steam,  the  fuel-consumption  of  a  modern  ship  has  been 
brought  so  low — so  that,  as  remarked  several  years  ago,  "a  sheet 
of  note-paper  burnt  in  the  furnaces  would  carry  a  ton  a  mile" — 
that  further  progress  in  this  direction  does  not  promise  much. 
The  chief  costs  in  ocean-freight  are  now  the  fixed  charges,  labor, 
insurance,  etc.,  rather  than  fuel.  It  is  in  this  "line  that  an 
unmeasurable  stimulus  to  foreign  trade  and  travel  has  been  felt 
from  the  invention  of  the  wireless  telegraph  and  the  gyroscopic 
compass.  We  are  told  that  transatlantic  travel  now  loses,  by 
reason  of  these  aids,  not'  one-fifth  the  annual  toll  exacted  by  the 
sea  only  a  generation  ago. 

The  Telegraph.— There  is  probably  no  other  feature  of  the 
modern  arts  (possibly  excepting  the  steam-engine)  which  has 
made  such  profound,  albeit  unconscious,  changes  in  our  civiliza- 
tion as  did  the  telegraph,  which  came  into  use  in  the  eighteen- 
forties.  Up  to  that  time  the  slow  and  disconnected  railway- 
service  had  been  the  fastest  means  of  communication  available. 


28  MODERN   ECONOMIC   TENDENCIES 

Marvelous  as  was  the  change  wrought  by  the  railway  over 
stage-coach  days,  yet  the  former  was  but  an  improved  stage- 
coach. Messages  could  still  be  transmitted  only  so  fast  as  the 
human  body  could  travel. 

But  the  telegraph  was  really  a  marvel.  It  consumed  no  time 
at  all.  It  disembodied  the  soul  from  its  cumbering  flesh  and 
projected  it  through  space  regardless  of  time.  According  to 
the  vernacular  of  a  later  day,  whereas  the  telephone  might 
boast :  "What  I  say  goes" ;  the  telegraph  might  retort :  "Huh ! 
What  I  say  goes  without  saying."  It  linked  together  people 
over  larger  areas  than  ever  before  were  imaginable.  In  many 
ways  days  were  reduced  to  hours,  and  states  to  counties.  When 
the  first  Atlantic  cable  was  opened,  in  1869,  New  York  was 
jocosely  styled  a  suburb  of  London ;  but  that,  or  its  reverse,  has 
since  become  a  fact. 

It  was  inevitable  that  so  basic  an  advance  in  the  solidarity 
of  life  as  this  should  find  reflection  in  an  equally  basic  alteration 
of  our  political  ideas  and  institutions.  Unity  of  contact  and 
freedom  of  intercourse  between  previously  dissevered  communi- 
ties necessitates  an  aggregation  of  their  political  powers.  It 
was  this,  primarily,  which  enforced  drastic  change  in  our 
domestic  politics  in  1861.  It  was  this  which  compelled  a  revo- 
lution in  our  traditional  foreign  policy  in  1917.  Before  this 
great  new  fact  of  human  cementation  by  electric  telegraph 
might  become  a  digested  part  of  our  American  body  politic, 
two  generations  ago,  the  time-honored  tradition  of  "sovereign 
state's  rights,"  inherited  from  the  crude  jealousy  of  the  early 
colonies,  had  to  be  "trampled  to  death  beneath  the  feet  of  a 
million  marching  men,"  in  the  horrors  and  inspirations  of  the 
Civil  War. 

But  digested  it  was.  As  soon  as  the  railway  and  telegraph 
had  been  appreciably  adopted  the  country  had  become  mechan- 
ically a  real  unit.  It  must  be  one  politically  also. 

Invention  the  Dominator  of  Politics. — Politics  is  nowhere 
the  result  of  freak  or  whim,  but  always  a  consequence  of  physical 
and  mechanical  environment.  Always  and  everywhere,  in  social 
evolution,  it  is  improved  means  for  transportation  and  com- 
munication which  have  been  the  foremost  factors  in  guiding  and 
promoting — in  sheerly  coercing — social  advance.  They  unite 
into  living,  interacting  organisms  fragments  of  population  or 
territory  which  were  previously  dissevered,  and  therefore  inert. 


THE  APPROACH  29 

They  release  sources  of  social  energy  hitherto  unsuspected,  the 
magnitude  of  which  is  not  understood  even  after  their  presence 
has  become  familiar. 

Without  the  railway  and  telegraph  slavery  and  secession 
would  probably  have  become  permanent,  for  some  decades  after 
1860  at  least.  The  North  would  have  protested  morally  and 
ethically,  as  it  had  been  doing  for  a  generation  before;  but  it 
would  have  been  living  too  far  away,  too  indirectly  affected  by 
the  South,  to  go  to  war  about  it.  Certainly  this  would  have 
been  so  without  steam-transportation. 

Without  the  Pacific  railways,  first  really  operative  in  1870, 
California  must  inevitably  have  regained  her  original  political 
independence  of  the  states  east  of  the  Missouri.  It  would  have 
been  too  far  distant,  in  time  and  effort,  for  political  unity. 
Under  local  and  Asiatic  influences  widely  different  from  those 
at  work  upon  the  East,  "the  Coast"  would  surely  have  drifted 
away  from  its  earlier  slender  allegiance,  which  was  hardened 
into  true  unity  only  by  the  telegraph,  the  railway  (which  in 
this  case  arrived  second),  and  the  Civil  War  which  they  aroused. 

Communication  Causes  Consolidation. — Easy  physical  access 
and  communication  is  the  one  cement  by  which  peoples  are 
first  bonded  into  actual  consolidation.  If  this  actual  solidarity 
be  recognized  properly  and  promptly  in  their  political  institu- 
tions, all  is  well.  If  not,  the  bonds  will  irritate  rather  than 
unite,  and  war  or  revolution  must  occur. 

Institutions  must  be  accurate  and  harmonious  expressions 
of  natural  facts,  else  readjustment  of  an  earthquake  character 
must  ensue.  This  is  the  fundamental  law  of  modern  social 
evolution. 

No  history  can  be  understood  without  this  law.  There  is  no 
place  in  history  in  which  it  stands  out  more  plainly  than  in 
the  American  development  of  the  telegraph,  the  railway  and 
the  Atlantic  cable. 

More  Recent  Inventions. — The  still  more  penetrating,  if  less 
spectacular,  influence  of  such  inventions  as  the  typewriter 
(1872),  the  telephone  (1878),  the  electric  light  (I860)  and  the 
trolley-car  (1885),  in  the  rapid  development  of  modern  civic 
conditions  of  size,  congestion  and  activity  of  cities,  can  receive 
only  bare  mention.  To  many  readers  the  changes  which  they 
wrought  have  been  matters  of  personal  experience.  To  the 
young  they  are  already  of  the  mysteries  of  the  past. 


30  MODERN   ECONOMIC   TENDENCIES 

Solidarity,  Diversity  and  Civilization, — The  telephone  and 
the  trolley-car  (using  the  latter  term  generically  to  cover  all  forms 
of  urban  electric  traction,  including  elevated  and  subway  lines) 
contributed  to  the  solidarity  of  the  modern  city.  The  electric 
light  equipped  it  with  that  first  requisite  for  social  development, 
after  solidarity — namely,  diversity — by  making  the  new,  third 
"half-day"  of  city-life,  the  evening,  almost  the  most  important 
of  the  three.  The  attempt  to  imagine  what  would  happen  to 
modern  social,  theatrical,  club,  art  and  lecture  circles  if  they 
should  be  forced  to  return  to  reliance  upon  the  yellow,  flaring, 
vitiating  gas-flame,  which  formed  the  finest  illuminant  available 
when  people  now  middle-aged  were  young,  constitutes  a  reduc- 
tion to  absurdity. 

The  Elevator. — One  other  most  important,  though  commonly 
overlooked,  department  of  transportation  deserves  special  men- 
tion. This  is  the  elevator.  The  wonderful  modern  mushroom- 
growth  of  skyscraper  office  and  apartment  buildings  is  due  to, 
or  is  permitted  by,  the  modern  elevator  alone.  Thirty-five 
years  ago  the  sky-line  of  lower  Manhattan  was  a  virtual  level 
of  four  or  five  story  flat  roofs,  broken  only  by  the  church-spires, 
the  shot-tower  and  the  then  Equitable  Building.  Such  Man- 
hattan would  have  had  to  remain  had  not  elevators  of  a  type 
then  undreamed  made  it  profitable  to  rent  offices  forty  or  fifty 
stories  above  the  sidewalk. 

The  congestion  of  the  slums  has  been  paralleled  by,  and  ap- 
parently enforced  by,  the  congestion  of  business  in  the  sky- 
scrapers. The  slums  will  not  disappear  until  the  skyscrapers 
come  down.  But  this,  if  history  repeats  itself,  will  be  quicker 
than  they  went  up. 

Invention  in  General. — Of  progress  in  the  more  general  manu- 
facturing arts  still  more  cursory  disposal  must  be  made.  We  are 
concerned  with  their  effects  rather  than  with  themselves.  The 
one  of  prime  importance  is  undoubtedly  that  of  rapid  printing 
by  steam-power,  chiefly  at  the  hands  of  Hoe.  The  speed  and 
ease  with  which  this  process  permits  ideas  to  be  disseminated 
among  large  numbers  of  people  stands  on  a  par  with  the  rail- 
road and  the  telegraph,  or  telephone,  in  its  effect  for  solidarity 
and  stability  in  modern  communities.  Either  our  nation  as 
a  whole  or  any  of  its  large  cities,  if  suddenly  deprived  of  modern 
printing,  would  die  of  anarchy  and  riot,  due  to  mutual  mis- 
understanding between  individuals  and  classes,  almost  as  soon 


THE   APPROACH  31 

as  it  would  starve  bodily  if  all  steam-transportation  were  to 
cease. 

Almost  the  same  is  to  be  said  of  such  an  invention,  for  in- 
stance, as  the  Bessemer  process  for  the  cheap  production  of  steel 
in  large  quantities,  for  rails,  bridges,  buildings,  etc.  Such  mate- 
rial accomplishments  stand  as  the  very  skeleton  of  our  modern 
community-life,  just  as  the  railways  stand  as  its  blood-circula- 
tion and  the  telegraph  and  telephone  wires  as  its  nerves. 

Indirect  as  may  seem  the  connection  between  such  uninter- 
esting mechanical  achievements  and  the  ideas  or  tastes  of 
modern  civilization,  they  are  in  fact  as  closely  interdependent 
as  is  the  work  of  an  artist  with  a  healthy  development  of  his 
bones  and  arteries.  Our  understanding  of  all  the  finer  metabolic 
and  psychological  processes  of  the  human  body  was  impossible 
until  the  mechanism  of  the  body  in  its  grosser  aspects  had  be- 
come understood.  As  one  of  the  foremost  instances  of  such  may 
be  mentioned  Harvey's  discovery  of  the  circulation  of  the  blood 
— a  fact  now  so  familiar  a  basis  for  every  biological  deduction 
that  it  is  incomprehensible  how  any  progress  in  medical  science 
had  been  possible  without  it. 

Yet  Harvey  discovered  merely  the  hydraulic  fact  of  circula- 
tion. The  far  more  significant  discovery  of  the  alteration  of  the 
blood  from  arterial  to  venous  in  the  capillaries  had  to  follow 
that.  The  still  more  important  hydrodynamic  fact  of  blood- 
pressure  must  await  both  of  these. 

The  parallel  in  social  metabolism  is  perfect.  We  cannot  un- 
derstand that  mysterious,  yet  all-explaining,  transformation  of 
human  energy  between  the  processes  of  production  and  consump- 
tion— as  significant  as  the  capillary  transformation  of  the  blood 
— unless  we  first  understand  accurately  the  grosser  facts  of 
invention,  transportation,  distribution,  etc.,  which  form  its 
mechanical  basis.  It  is  to  parallel  somewhat  for  the  economic 
and  ethical  community  such  pioneer  work  of  the  early  anatomists 
of  the  physical  body,  that  this  book  proposes  now  to  trace 
roughly  the  connection  between  material  invention,  the  data  as 
to  which  have  just  been  given,  and  the  resultant  evolution  of 
American  politics,  economics  and  ethics. 

Nineteenth-century  Evolution. — It  is  against  such  a  back- 
ground of  wonderfully  rapid  material  accomplishment  as  the  fore- 
going, then,  that  those  less  easily  discernible  but  far  more 
important  changes  in  our  economic  institutions  during  the  last 


32  MODERN   ECONOMIC   TENDENCIES 

half -century  must  be  viewed  in  contrast.  During  the  first  half  of 
the  nineteenth  century  these  changes,  while  already  under  way, 
had  attained  little  significance.  The  beginnings  of  later  growth 
were  there,  plainly  enough;  but  their  modern  luxuriant  devel- 
opment had  not  yet  been  effectively  fertilized  by  the  wide  adop- 
tion of  mechanical  devices,  some  of  which  were  even  then  already 
invented. 

The  steam-engine,  the  turbine  water-wheel  and  the  factory 
were  already  existent,  it  is  true,  long  enough  ago  to  have  pro- 
duced the  economic  crisis  in  England  of  1830;  but  they  had 
had  little  effect  in  America  as  yet.  This  country  was  growing 
too  rapidly,  land  was  too  free  and  the  factory  too  small  a 
feature  relatively  to  the  rest  of  the  country,  to  permit  economic 
forces  to  be  emphasized.  We  were  still  a  nation  of  pioneers.  Our 
obstacles  were  still  chiefly  physical,  rather  than  organizational, 
as  now. 

Although  invention  was  exceedingly  active  throughout  the 
two  decades  preceding  the  Civil  War,  at  which  time  we  first 
became  conscious  of  ourselves  as  a  technical,  rather  than  an 
agricultural,  nation,  laying  the  foundations  for  a  later  world- 
recognition  as  such,  yet  it  took  some  time  for  this  inventive 
outburst  to  exert  appreciable  economic  effect.  Even  our  rail- 
roads, the  first  feature  of  a  pioneer  land  to  assume  economic 
importance,  did  not  attain  physical  vigor  until  the  eighteen- 
fifties,  and  other  inventions  of  basic  importance  passed  their 
adolescence  still  later. 

The  first  reaction  of  invention  upon  American  social  evolu- 
tion took  the  form  of  the  development  of  slavery — a  form  of 
domestic  servitude  which,  previously  to  the  opening  of  the  nine- 
teenth century,  had  been  comparatively  unobjectionable — into 
a  vast  money-making  system,  embodying  all  the  cruelties  which 
always  accompany  profit-making  on  a  large  scale.  The  cotton- 
gin,  the  power-driven  cotton-mill,  the  steamboat  and  the  rail- 
way had  together  made  cotton-growing  practicable  upon  a  scale 
of  quantities  and  profits  before  unattainable.  It  was  these  sub- 
conscious innovations,  and  no  peculiarities  of  Southern  cruelty 
or  Northern  altruism,  which,  by  the  middle  of  the  last  century, 
had  forced  slavery  into  such  prominence  that  all  other  interests 
must  give  way  before  it.  It  is  these  mechanical  wizards  which 
cast  over  America  a  spell  which  could  not  be  dissolved  until 
slavery  had  been  abolished. 


THE   APPROACH  33 

Thus  our  economic  reactions  from  mechanical  invention,  dur- 
ing this  earlier  period,  were  devoted,  first,  to  the  development 
of  slavery,  and  then  to  the  dire  struggle  over  its  abolition. 
It  was  not  until  this  political  spasm  was  over  that  our  modern 
economic  history  really  began,  in  the  credit-issues  of  the  Civil 
War,  in  the  boom  times  of  1864-72,  in  the  rapid  commercial 
and  railway  expansion  of  these  years,  and  in  the  final  collapse 
of  inflated  values  in  1873. 

Then  again,  even  where  economic  forces  are  known  to  have 
been  at  work  at  earlier  dates,  we  have  no  reliable  knowledge 
as  to  their  extent.  Statistical  science,  as  well  as  other  arts, 
experienced  a  marked  stimulus  about  the  year  1850.  Therefore, 
while  data  will  always  be  carried  back  as  far  as  appears  safe, 
yet  what  follows  herein  concerns  primarily  only  the  last  seventy 
years  or  so  of  American  economic  history. 

The  Blunder  of  1840. — Of  these  early  beginnings  in  economic 
development  one  incident  in  particular  demands  mention  here, 
before  the  analysis  of  any  details  may  be  attempted.  The 
early  eighteen-forties  witnessed  a  change  in  national  methods 
and  beliefs  which,  although  quite  subconscious  at  the  time,  and 
largely  unnoticed  in  the  histories  written  since,  now  assumes 
a  prime  importance  in  the  light  of  facts  and  doctrines  only 
recently  become  prominent. 

When  this  youthful  nation  had  first  well  awakened  to  the 
realization,  during  the  first  quarter  of  the  nineteenth  century, 
that  development  of  natural  resources  was  especially  its  duty 
and  privilege,  it  was  universally  assumed,  without  discussion, 
that  all  enterprises  of  magnitude,  such  as  highways,  canals  and 
finally  railroads,  should  be  organized,  financed  and  built  by  the 
political  government — the  federal,  state  or  county  government, 
as  might  be.  Even  banking  was  undertaken  by  the  federal 
government. 

But  the  results  of  this  policy,  reviewed  in  a  word,  were 
financial  disaster.  However  this  result  may  be  explained,  as 
due  to  the  youth  and  inexperience  of  the  country  or  otherwise, 
there  can  be  no  question  as  to  the  fact :  disaster. 

The  resultant  reaction  of  public  opinion  was  as  complete  as 
it  was  inevitable.  Instead  of  the  country's  realizing  that  its 
principle  of  action  might  be  correct,  mere  details  of  method 
being  wrong,  and  setting  out  to  educate  itself  in  the  public 
handling  of  public  enterprises,  it  reverted  into  an  equally  tacit 


34  MODERN  ECONOMIC  TENDENCIES 

assumption,  which  has  prevailed  ever  since,  that  private  re- 
sources should  be  relied  upon  to  finance  and  direct  virtually 
all  large  public  matters. 

Perhaps  through  the  genius  of  Franklin  or  perhaps  through 
mere  freak  of  fortune,  one  gigantic  public  service,  that  of  col 
lecting  and  assorting  mail-matter,  has  remained  public  in 
method  as  well  as  in  character.  This  is  in  addition,  of  course, 
to  military  defense,  which  has  always  been  recognized  as  a 
public  duty.  But  aside  from  these  exceptions,  and  including 
even  the  transportation  of  the  mails,  all  large  enterprises  have 
been  financed  exclusively  upon  the  plan  of  private  ownership — 
with  reliance  upon  private  profit,  rather  than  public  service, 
as  both  the  motive  and  the  controlling  forces. 

The  further  policy  in  this  same  direction,  of  having  all  small 
enterprises,  down  to  the  most  modest  corner-grocery  or  sidewalk 
fruit-stand,  initiated  and  controlled  in  this  same  manner,  is 
one  inherited  from  the  past  in  a  manner  still  more  subconscious. 
There  has  been  even  less  question  as  to  this  than  has  applied, 
of  late,  to  the  private  ownership  of  the  "quasi-public"  services. 
Yet,  as  will  develop  as  we  proceed,  this  systemless  policy  of 
free  license  to  individuals  to  embark  upon  any  and  all  economic 
ventures,  without  other  responsibility  to  the  community  than 
to  apply  for  a  permit  and  pay  their  taxes,  is  one  fraught  with  an 
even  larger  significance  of  modern  tendencies,  if  not  with 
menace  of  coming  crisis,  than  the  other. 

We  shall  see  that  this  general  policy,  reacting  upon  a  phe- 
nomenal growth  of  invention  to  produce  as  startling  a  social 
change  as  did  slavery  in  the  same  way,  has  had  a  fundamental 
bearing  upon  the  economic  history  of  the  seventy-odd  years 
succeeding  1840,  stamping  the .  civilization  of  which  it  has 
formed  a  part  with  those  ear-marks  by  which  it  will  be  known, 
in  all  probability,  throughout  later  centuries.  Begun  in  the 
early  'forties,  this  distinctly  modern  policy  of  commercialism 
had  already  had  time  to  leave  its  first  imprint  upon  the  statis- 
tics of  1850.  By  1864  its  growth,  although  still  obscure,  had 
sufficiently  impressed  Lincoln  as  a  sign  significant  of  the  times 
so  that,  in  his  second  inaugural  address,  written  in  the  days  of 
direst  national  distress  due  to  the  wavering  issues  of  the  Civil 
War,  he  took  occasion  to  warn  the  country  against  its  menace, 
as  boding  a  crisis  possibly  worse  than  that  of  slavery  itself. 

Lincoln  of  course  did  not  see  this  problem  in  the  light  which 


THE  APPROACH  35 

has  since  been  thrown  upon  it;  nor  was  it  then  obscured  by  its 
present  intricacies — aided  by  the  deliberate  camouflage  always 
accompanying  huge  profits  and  gigantic  prestige.  But  his  mar- 
velous insight  warned  the  country  thus  early  against  the  dangers 
involved  in  issues  which  were  purely  internal  and  economic, 
rather  than  political;  and  in  so  doing  he  planted  an  invaluable 
milestone  for  our  guidance  in  fixing  dates  of  development  of 
public  recognition  of  this  huge  problem. 

It  happens,  too,  that  the  year  1850  furnishes  us  with  about 
the  earliest  economic  statistics  of  a  national  character  approach- 
ing completeness  or  reliability,  in  the  seventh  United  States 
Census.  What  follows  herein  will  therefore  be  an  analysis  of 
that  economic  evolution  of  our  land,  recorded  primarily  in  the 
Census  reports,  which  began  visibly  to  take  form  about  1840, 
as  a  result  enforced  by  the  physical,  and  particularly  the  in- 
ventional,  history  of  the  latter  half  of  the  eighteenth  century; 
which  gathered  headway  quickly  thereafter;  which  experienced 
marked  acceleration  at  the  close  of  the  Civil  War  and  continued 
to  accelerate  irregularly  thereafter  until  the  close  of  the  century ; 
which  witnessed  a  most  phenomenal  outburst,  as  the  result  of 
the  Cuban  War,  as  the  present  century  opened;  and  which  now 
shows  signs  of  undergoing  its  most  wonderful  stimulation  of 
all,  as  a  fruit  of  the  as  yet  unfinished  Great  War.  As  the  physical 
and  inventional  growth  which  played  the  role  of  cause  in  this 
development  has  been  accelerated,  as  the  decades  passed,  in 
arithmetical  ratio,  so  its  accumulating  resultant — modern  com- 
mercialism— should  naturally  be  expected  to  have  accelerated 
in  geometric  ratio.  This,  we  shall  see,  has  plainly  been  the 
case. 

So  marked  has  this  acceleration  become  of  late  that  condi- 
tions are  now  fast  approaching  the  critical  point.  There  is 
indubitable  evidence  that  in  1914,  had  not  the  Great  War  in- 
tervened with  its  artificial  stimulus,  diverting  us  from  the 
smaller  domestic  to  the  greater  world-problems,  we  should  even 
now  be  grappling  this  internal  crisis  in  one  of  the  greatest 
struggles  of  our  national  life.  The  economic  situation  prevailing 
in  the  winter  of  1913-14  and  the  following  spring,  when  there 
were  over  a  quarter-million  of  enforcedly  idle  in  New  York  City 
alone,  and  when  securities  had  fallen  to  near  half  of  their 
normal  value,  with  railway-traffic  and  mill-outputs  relentlessly 
restricted — although  no  one  here  then  dreamed  of  any  impend- 


36  MODERN  ECONOMIC  TENDENCIES 

ing  world-war — was  quite  without  a  parallel  in  our  economic 
history. 

This  present  analysis  of  American  history,  then,  will  be  based 
primarily  upon  the  seven  United  States  censuses  from  1850  to 
1910  inclusive.  Our  aim  must  be  not  merely  to  see  what  is 
our  economic  condition  to-day,  but  what  it  was  seventy  years  ago, 
and  in  which  direction  we  have  been  tending  since  then. 


CHAPTER  II 

THE    SOLE    AIM    OF    INDUSTRY:    LIFE-SUPPORT 

IN  turning  from  the  tangible  and  visible  to  the  institutional 
development  of  our  country  it  becomes  necessary,  before  resum- 
ing our  narrative  of  facts,  to  determine  carefully  our  concept 
of  the  fundamental  aim  of  all  industrial  effort.  For  conclusions 
as  to  the  significance  of  the  historical  facts — as  to  the  nature, 
the  success  or  the  failure  of  our  institutional  progress — must 
vary  widely,  according  to  differing  views  as  to  these  premises. 

Accuracy  at  just  this  point  will  prove  to  be,  as  to  later  con- 
clusions, what  the  aim  of  a  gun  is  to  the  flight  of  the  bullet — 
the  prime  determinant  of  hit  or  miss.  In  economics  as  else- 
where, no  conceivable  diligence  in  the  final  sorting  of  micro- 
scopic data,  after  an  inaccurate  start  in  the  statement  of  basic 
principles,  can  ever  convert  into  success  the  inevitable  failure 
to  hit  the  mark.  Here  is  where  the  average  professional  econ- 
omist goes  far  astray. 

The  task  before  us  is  the  study  of  American  economic  in- 
stitutions, their  nature  and  their  growth.  In  order  to  narrow 
this  gigantic  task  we  must  begin  by  eliminating  all  debate  of 
political  issues.  These  last  are  not  merely  irrelevant.  The 
prime  lesson  needed  to-day  is  that  they  are  impotent. 

We  are  no  longer  ruled  by  the  political  powers  which  we  have 
built  up  at  such  painful  cost  in  the  past,  but  by  those  far  more 
powerful  economic  forces  to  which  Congress  must  give  a  most 
attentive  ear,  or  which  work  their  will  regardless  of  political 
restraint — not  that  they  defy  the  laws,  but  that  we  cannot 
frame  laws  tight  enough  to  stop  escape.  Our  political  govern- 
ment now  rests  upon,  is  supported  by  and  is  controlled  by  our 
economic  institutions,  not  our  economic  institutions  by  our 
political  government. 

The  evolution  of  purely  political  institutions  is  now  fairly 
complete.  With  the  enunciation  of  the  principles  of  democracy 
in  our  Declaration  of  Independence  and  the  adoption  of  our 

37 


38  MODERN    ECONOMIC    TENDENCIES 

Constitution,,  with  later  ratification  and  extension  incidental  to 
the  abolition  of  slavery — with  the  advent  of  woman-suffrage, 
and  particularly  with  that  extension  of  political  democracy  to 
cover  all  small  nations  under  some  form  of  world-government 
which  promises  to  be  the  result  of  the  present  war — political 
liberty  has  now  reached  a  culmination  to  which  little  may  be 
added,  and  one  in  which  this  continent  has  led  the  world. 

Proportional  representation,  the  initiative  and  referendum, 
and  a  few  other  such  minor  measures  which,  however  important 
in  themselves,  are  plainly  secondary  to  what  has  been  accom- 
plished, and  plainly  fail  to  touch  the  big  economic  issues,  are 
the  only  political  refinements  still  in  the  air.  Our  political 
campaigns  and  legislative  sessions  have  descended  from  their 
early  dignity  into  the  commonplace,  if  not  the  sordid,  because 
they  no  longer  concern  issues  vital  to  the  people,  nor  to  the 
progress  of  the  hour. 

That  our  political  evolution  is  complete  is  proven  by  the  fact 
that  political  issues  have  been  overwhelmed  by  economic  ones 
in  every  form  of  public  debate.  The  sole  apparent  exception 
to  this  is  the  common,  but  mistaken,  effort  to  answer  economic 
demands  with  futile  political  remedies. 

The  Economic  Problem. — The  basic  question  of  all  economics 
is :  What  is  the  real  aim  of  the  industrial  system  of  any  land  ? 

This  is  the  crux  of  the  whole  problem.  Society  to-day  is 
doing  certain  things  with  marvelous  skill  and  amazing  energy, 
only  to  find,  after  they  are  done,  that  they  have  not  brought 
happiness,  nor  even  material  comfort.  Economic  literature  is 
full  of  discussion  of  more  or  less  efficient  methods  for  the  ap- 
plication of  human  effort  to  certain  ends,  without  a  word  as  to 
the  comparative  wisdom  of  ever  undertaking  the  enterprise  in 
question,  nor  as  to  the  value  of  the  result  when  gotten,  however 
efficiently. 

In  spite  of  all  our  increasing  scientific  and  technical  ac- 
curacy and  efficiency,  world-wide  discontent  and  turbulence  are 
increasingly  rife.  Our  wonderfully  systematized  factories  are 
not  keeping  up  our  productivity  of  contentment.  Men  are 
everywhere  trying  to  make  new  records  of  speed  or  accomplish- 
ment, yet  instead  are  making  fools  or  brutes  of  themselves,  by 
the  folly  of  the  thing  attempted. 

The  Natural  Economic  Aim. — No  apology  is  needed,  there- 
fore, for  recurrent  emphasis  upon  the  proper  aim  of  all  economic 


THE    SOLE    AIM    OF    INDUSTRY!     LIFE-SUPPORT  39 

effort.  The  economist  must  keep  his  mind  fixed  upon  this 
guiding  question  as  the  sailor  keeps  his  eye  upon  the  compass. 

It  must  never  be  forgotten,  then,  that  all  modern  systems 
of  industry  and  commerce  are  but  the  intricate  developments  of 
the  simple,  primitive  processes  by  which  the  isolated  savage  or 
hermit  procured  for  himself,  from  the  soil,  the  sea  or  the  forest, 
what  he  wished  to  eat  or  wear.  However  complex  these  modern 
systems  may  become,  to  meet  modern  conditions  of  enormous 
populations,  united  over  vast  territories  by  intricate  facilities  for 
communication,  this  basic  purpose  remains  ever  unchanged.  It 
cannot  be  changed,  however  lost  to  view  it  may  at  times  become. 

The  sole  natural  aim  of  all  industry  and  commerce  is  to 

Feed  the  Ultimate  Consumer. 

The  sole  object  of  all  wholesome  economic  effort  is  to  support 

and  elevate  individual  human  life. 

Any  other  devotion  of  effort  than  that,  amongst  an  industrial 
or  commercial  people,  is  a  sheer  waste  and  dissipation  of  energy, 
whatever  may  be  its  solemn  sanction  by  law  or  tradition,  or 
its  apparent  pecuniary  profitableness.  This  is  the  acid-test  by 
which  each  atom  of  economic  effort  must  be  identified,  as  either 
productive  or  unproductive  of  human  happiness,  and  hence  to 
be  encouraged  or  abolished. 

Natural  Production. — Imagine,  then,  a  hermit  living  in  the 
edge  of  a  wood,  with  a  meadow  and  a  river  near  by.  All  the 
natural  resources  for  agriculture,  forestry,  hunting,  fishing, 
herding,  etc.,  may  be  supposed  to  be  available.  But  all  of  these, 
we  will  imagine,  he  must  develop  alone.  In  this  work  what 
must  be  his  guide?  In  which  direction  shall  he  exert  his 
strength  and  skill? 

The  only  possible  answer  is :  His  own  desire.  For  his  desire 
is  supposedly  a  prudent,  natural  one,  tempered  by  experience, 
rather  than  the  untutored  impulse  of  a  child.  Hence  the  value 
or  efficiency  of  his  own  efforts  in  behalf  of  his  own  happiness 
is  measured  solely  by  the  accuracy  with  which  he  permits  his 
desire  to  guide  his  labor. 

If,  for  instance,  he  proves  a  most  industrious  and  successful 
farmer  at  raising  turnips,  yet  he  detests  turnips,  or  a  most 
fortunate  fisherman,  when  he  prefers  game  to  fish,  his  labor  will 
not  feed  him.  Although  he  may  be  rich  in  commodities  he  is 


40  MODERN   ECONOMIC  TENDENCIES 

poor  in  happiness.  Through  ignorance  or  perversity  or  super- 
stition, he  is  starving  in  happiness  amidst  material  plenty. 

Social  Motor-nerves.— In  the  case  of  the  hermit  it  is  difficult 
to  imagine  what  motive  should  lead  him  thus  to  disregard  his 
own  desires;  for  the  one  delight  of  the  hermit-life  is  the  free- 
dom to  do  exactly  as  one  pleases.  But  in  the  case  of  modern 
society,  wherein  the  impulses  which  guide  each  individual  act 
are  but  crude  transmissions,  through  a  clumsy,  intricate  social 
mechanism,  of  a  most  remote  and  composite  individual  desire, 
originating  with  a  myriad  of  unknown  persons  lost  to  view 
amidst  the  intricacies  of  the  Consuming  Public,  there  is  grave 
doubt  as  to  this  accuracy  of  transformation  of  basic  biological 
desire  into  actual  social  accomplishment.  A  prime  character- 
istic of  modern  society  is  its  proneness  to  find  itself  developing 
acts  and  institutions  which  it  did  not  intend  and  does  not  want. 

The  one  objection  to  life  in  modern  congested  society  is  that, 
whatever  may  be  the  consolations,  one  cannot  do  as  one  naturally 
pleases.  Desires  no  longer  guide  actions.  Effort  is  constrained 
by  environment  and  necessity,  rather  than  by  sentiment;  and 
environment  is  determined  for  us  by  fixed  institutions  which 
cannot  be  changed  by  individual  will. 

This  is  most  obviously  true  in  the  economic  field.  There 
people  normally  work  long  after  they  are  wholesomely  tired — 
long  after  they  would  prefer  rest  to  pay,  if  only  the  rest  might 
be  had  without  losing  the  job.  Conversely,  they  often  idle  when 
they  are  hungry  and  anxious  for  work. 

Yet  the  modern  economic  system  is  merely  the  latest  develop- 
ment of  the  muscles  of  the  primitive  hermit.  The  modern 
Ultimate  Consumer  corresponds  with  the  palate  of  the  hermit, 
as  to  food,  or  to  his  back  as  to  clothing.  In  between  palate 
and  muscles,  in  the  hermit,  lie  merely  his  motor-nerves,  trans- 
lating demand  into  supply.  Yet  if  their  action  be  perturbed 
by  the  presence  of  some  false  superstition  in  his  brain  they 
will  not  transmit  truly.  He  will  act  insanely. 

Similarly,  in  between  the  producing  factory-system  of  modern 
society  and  the  Ultimate  Consumer,  whose  desires  alone  must 
guide  it,  lies  the  whole  intricate  fabric  of  sale  and  purchase, 
resale  and  repurchase,  attempting  to  translate  the  demands  of 
a  myriad  of  distant,  scattered  and  unidentified  Consumers  into 
productive  activity  within  the  factory.  How  much  more  easy 
is  it,  in  such  an  indirect  transmission  as  that,  that,  if  there 


THE   SOLE   AIM   OF  INDUSTRY:     LIFE-SUPPORT  41 

should  lie  in  the  brain  of  society  some  false  economic  super- 
stition, our  ultimate  distortion  of  these  originally  wholesome 
demands  may  become  as  erratic  and  inefficient  as  the  vagaries 
of  a  crazy  hermit?  As,  in  the  individual,  it  may  be  either 
the  originating  brain  or  the  transmitting  nervous  system  which 
develops  erratic  action,  still  more  is  this  true  of  society. 

Therefore,  the  social  question  now  pressing  this  generation 
to  the  wall  for  a  reply  is:  Are  our  economic  motor-nerves 
working  truly?  Does  our  selling-system  transmit  truly  to  the 
producer  either  the  desires  or  the  payments  of  the  Ultimate 
Consumer?  Is  modern  commercialism  doing  what  the  Con- 
sumer really  needs  or  desires?  Or  may  it  not,  on  the  other 
hand,  be  directing  its  best  energies  into  other  acts,  which  may 
net  it  good  profit  but  which  starve  the  Ultimate  Consumer? 

Value. — It  is  only  in  the  market  that  these  questions  may  be 
answered.  It  is  only  where  produce  is  consumed  in  the  Ulti- 
mate Support  of  Life  that  criterion  may  arise  as  to  whether 
value  has  been  produced  in  the  making  of  it,  or  whether  effort 
has  been  dissipated  in  the  creation  of  sheer  rubbish. 

This  is  the  supreme  economic  test.  That  thing  alone  has 
value  which,  because  it  nourishes  and  pleases  the  Ultimate  Con- 
sumer, stimulates  his  motor-nerves  and  muscles  into  a  renewed 
activity  capable  of  producing  in  turn  the  equivalent  of  that 
consumed,  or  more. 

Economic  Sovereignty. — It  is  at  this  point  alone,  also,  that 
arises  the  sole  authority  for  directing  production.  The  poorest 
in  the  land,  if  he  have  but  a  dime  to  spend,  rises,  during  the 
spending  of  it,  into  supreme  authority  over  the  industrial  sys- 
tem of  the  land.  For  he  is  a  free  agent  in  selecting  what 
he  shall  purchase,  and  the  thing  thus  selected  from  the  shop- 
shelf  must  then  be  replaced  by  some  factory;  while  the  thing 
next  to  it  is,  for  that  moment,  unwanted,  worthless  rubbish. 

In  all  economics  it  is  the  desire  or  need  of  Him-who-Spends- 
Money  which  exercises  supreme  control  over  all  industry.  That 
authority  each  producer  must  obey  absolutely.  Just  as  the 
most  solitary  recluse  in  the  world  is  a  slave  to  his  own  desires, 
so,  in  the  most  congested  society,  the  producer  is  the  slave  of 
the  Ultimate  Consumer — not  in  an  unnatural,  oppressive  sub- 
jugation, but  in  a  natural  wholesome  submission  which  forms 
the  sole  natural  foundation  for  social  happiness. 

As  producers,  neither  recluse  nor  factory-hand  have  anything 


42  MODERN   ECONOMIC   TENDENCIES 

to  say  as  to  what  is  to  be  done.  Each  must  work  at  what  is 
wanted  for  consumption.  It  is  only  when  the  consumer-half 
of  either  the  hermit  or  the  factory-hand  comes  into  play  that 
he  becomes  Absolute  Sovereign  over  all  who  work. 

So  long  as  the  Ultimate  Consumers  like  and  can  subsist  upon 
what  a  workman  makes  he  produces  value,  and  is  prosperous 
and  happy.  Just  as  soon  as  they  reject  his  produce — although 
it  in  itself  may  not  have  changed — he  ceases  to  be  a  producer, 
or  to  be  happy  and  prosperous,  whatever  may  be  his  industry 
or  skill.  A  factory  of  ten  thousand  able  artisans  may  work 
industriously  for  a  year;  yet  all  they  will  have  produced,  if  it 
does  not  meet  with  the  Consumer's  approval — if  it  cannot  be 
sold — will  be  sheer  rubbish. 

Social  Perfection. — It  is  the  degree  to  which  this  sovereignty 
is  embodied  in  the  economic  organization  of  a  nation  that  that 
nation  preserves  to  its  people  effective  justice,  true  prosperity, 
social  content  and  permanent  stability.  It  is  the  perfection 
or  imperfection  with  which  a  society  guarantees  to  each 
Sovereign  Consumer  this  right,  authority  and  opportunity  to 
control  and  direct  most  accurately  the  productive  effort  which 
supplies  him  with  that  upon  which  he  subsists,  which  measures 
that  society's  efficiency  or  inefficiency  in  the  development  of 
human  happiness,  domestic  peace  and  social  stability. 

Just  as  all  political  liberties  rest  inalienably  upon  the  consent 
of  the  governed,  manifested  in  a  jealously  guarded  equality 
and  freedom  of  ballot-franchise  for  the  individual  Voter;  just 
as  the  autonomy  of  the  individual  conscience  in  all  matters  of 
divine  worship  lies  at  the  bottom  of  that  religious  liberty  which 
men  have  found,  by  centuries  of  bitter  experience,  to  be  the 
first  requisite  for  a  stable,  civilized  society;  so  the  no  less  im- 
portant economic  liberties  are  founded  upon  the  breadth,  purity 
and  freedom  with  which  the  Ultimate  Consumer  exercises  his 
naturally  sovereign  right  of  control,  at  the  point  of  retail  pur- 
chase, over  all  industry  of  production  and  distribution. 

Orthodox  Error. — So  simple  and  obvious  is  this  truth  that  its 
emphasis  seems  silly.  Yet  the  bulk  of  all  present  economic 
discussion  wanders  away  into  impotent  irrelevancy  through  care- 
lessness or  error  at  this  one  elementary  point.  Not  only  whole 
volumes,  but  whole  libraries  of  treatises,  have  been  published, 
and  are  regularly  accepted  by  our  universities,  although  they 
are  based  upon  the  arbitrary,  unnatural  and  unjust  assumption 
— often  made  unconsciously — that  some  other  thing  than  the 


THE   SOLE   AIM   OF   INDUSTRY:     LIFE-SUPPORT  43 

support  of  life,  or  the  gratification  of  desire,  in  the  Ultimate 
Consumer,  is  the  criterion  of  value  in  industry,  or  that  such 
other  thing  is  equivalent  to  human  life,  or  that  economic 
sovereignty  should  be  centered  somewhere  else  than  in  the 
Ultimate  Consumer. 

Thus,  to  most  economists,  the  possession  by  a  thing  of  "value 
in  exchange"  stamps  it  as  having  value.  Yet  how  can  this  be 
cogent?  There  are  many  things,  such  as  lottery-tickets,  or 
seats  at  a  prize-fight,  or  bottles  of  whisky,  or  lumps  of  opium, 
which  possess  high  valuation  in  exchange;  yet  all  agree  that 
they  are  biologically  destructive  of  life,  and  therefore  cannot 
be  conceived  as  having  real  value. 

Why  does  not  this  same  criterion  apply  economically?  Why 
does  not  this  same  question  attach  with  equal  force  to  some 
other  things,  such  as  stocks,  bonds,  franchises,  etc.,  which  are 
everywhere  admitted  as  having  great  valuation  in  exchange  ?  We 
must  have  some  criterion  of  true  value  which  is  much  more 
reliable  than  "value  in  exchange." 

The  Sole  Economic  Criterion. — In  the  present  work  no  hazi- 
ness upon  this  issue  will  be  tolerated.  It  is  the  life  of  the 
Ultimate  Consumer  which  alone  counts  as  of  value.  Com- 
modities or  services  embody  value  solely  as  they  contribute  to 
that  life.  All  else  is  dross,  waste  or  poison. 

Therefore  no  middleman  nor  duplicator  nor  advertiser  nor 
financier,  nor  any  intermediate  service  whatever,  between  the 
original  source  of  quite  raw  material  and  the  Ultimate  Con- 
sumer, possesses  any  economic  rights  whatever,  except  as  he 
or  it  may  actually  contribute  to  the  life-support  of  the  Ultimate 
Consumer.  Hence  each  of  these  may  wield  economic  sovereignty 
only  when,  in  his  own  function  of  Ultimate  Consumer,  he  buys 
the  produce  of  others. 

Similarly,  no  profit,  nor  income,  nor  credit-instrument,  nor 
"security,"  nor  commercial  enterprise,  nor  instrumentality  of 
any  form  whatever,  will  be  admitted  as  being  socially  whole- 
some, or  as  having  any  value  whatever  to  the  community,  except 
as  it  may  actually  create  life-support  for  the  Ultimate  Con- 
sumer. 

In  order  to  do  that,  any  such  an  instrument  or  service  must 
represent  effort  productive  of  life-support  according  to  the  taste 
of  the  Consumer;  and  to  meet  this  test  it  must  exist  at  the 
conscious  behest  of  the  Consumer,  and  not  merely  be  accepted 
by  him  because  it  is  thrust  upon  him.  This  gage  of  right  or 


44  MODERN   ECONOMIC  TENDENCIES 

wrong  in  the  economic  world  must  be  supplied  with  the  utmost 
sternness. 

Therefore,  in  the  expression  of  this  taste,  society  must  guar- 
antee to  the  Consumer  the  fullest  opportunity  to  inform  himself 
as  to  all  economic  facts.  There  can  be  no  secrets  from  the 
king.  The  natural  will  of  the  Ultimate  Consumer  must  find 
itself  in  accurate,  free  control  over  all  economic  facts. 

The  Basic  Economic  Contrast. — This  basic  contrast  between 
that  portion  of  the  industrial  or  business  system  which  actually 
supports  the  life  of  the  Ultimate  Consumer  and  these  various 
other  things  incidental  or  irrelevant  to  it,  or  parasitical  upon 
it,  pretending  to  an  importance  which  is  not  theirs  by  right, 
may  be  crystallized  within  the  terms  "value"  and  "valuation" 
respectively,  to  which  may  be  assigned  these  preliminary  defini- 
tions : 

(1)  Value  is  the  ability  of  any  human  activity,  whether 
exerted  directly  or  stored  potentially  in  the  form  of  a  com- 
modity, to  support  the  life,  or  at  least  gratify  the  desire,  of 
him  who  ultimately  absorbs  it. 

(2)  Valuation  is  the  measure  in  money  which  the  existing 
economic  system  places  upon  this  or  any  other  act  or  com- 
modity— what  is  commonly  called  its  "value  in  exchange." 

Economics  in  Terms  of  Human  Energy. — A  full  understand- 
ing of  these  definitions  will  not  be  possible  until  a  number  of 
factors  have  been  considered.  For  the  present  it  suffices  to  note 
that  all  the  quantities  concerned  and  measured-  are  amounts 
of  human  energy.  It  is  human  energy  alone  which  produces 
value.  It  is  human  energy  alone  which  is  to  be  produced  as 
a  result  of  its  ultimate  consumption.  The  energy  may  be  either 
that  of  brains  or  of  brawn,  but  it  is  always  human. 

While  we  may  at  times  be  forced  to  use  money  as  an  ap- 
proximate measure  of  human  energy,  for  lack  of  some  more 
stable  and  penetrative  standard,  yet  money  is  recognizable  as 
of  value  itself  only  because  it  embodies,  and  therefore  serves 
as  a  means  for  the  transfer  of,  human  energy.  If  it  be  true, 
as  has  been  suggested,  that  no  satisfactory  measure  of  human 
energy  can  be  found,  then  we  can  never  have  any  exact  science 
of  economics,  able  to  foretell  manifestations  of  human  energy 
as  accurately  as  the  science  of  astronomy  foretells  eclipses.  But 
neither  of  these  assumptions  will  be  given  credence  here,  in 
the  premises. 


CHAPTER  III 

THE    COTTAGE-SYSTEM    AND    THE   FACTORY-SYSTEM 

The  Archaic  Cottage-system. — The  standard  productive  sys- 
tem of  a  century  or  more  ago  was  a  very  simple  affair  and  needs 
little  description.  Known  widely  as  the  cottage-system,  the 
term  indicates  approximately  the  nature  of  the  "system." 

Yet  work  need  not  be  done  in  a  cottage  in  order  to  fall 
properly  under  the  term  cottage-system.  The  name  implies 
merely  that,  whether  done  in  an  early,  crude  shop,  or  on  a 
farm,  or  in  the  home,  it  was  done  upon  the  simple  plan  fol- 
lowed by  virtually  all  our  ancestors  in  making  virtually  all 
their  household  needs.  That  is,  the  thing  was  produced  in 
fair  entirety  by  a  single  workman,  or  a  single  household;  it 
was  consumed  either  by  those  who  made  it,  or  by  Ultimate 
Consumers  who  bought  direct  from  the  producers;  and  all  the 
tools,  raw  material  and  product  involved  were  owned  by  those 
who  did  the  work. 

Although  by  a  century  ago  a  beginning  had  been  made  in  the 
replacement  of  this  simple  plan  by  the  modern  factory-system, 
yet  it  was  only  a  beginning.  Long  after  that  time,  even  down 
to  the  year  which  has  been  selected  here  as  representing  the 
start  of  the  modern  period,  1840,  the  bulk  of  all  the  com- 
modities which  are  now  regarded  as  exclusively  factory-products 
were  still  made  (if  made  at  all)  by  the  housewives,  or  by  the 
men-folk  in  the  shop  attached  to  almost  every  farm,  or  in  a 
village-shop  which  catered  only  to  village-trade.  Although  no 
date  can  be  set  at  which  this  plan  gave  way  to  the  modern 
one,  yet  year  by  year,  and  industry  by  industry,  the  transfer 
has  been  made  from  the  simple,  primitive  cottage-system  to  the 
intricate  modern  factory-system;  and  the  bulk  of  this  transfer 
has  been  effected  since  1840  or  1850,  the  initial  point  of  our 
statistics. 

Riches  Follow  the  Abandonment  of  the  Cottage-system. — 
Simultaneously  with  this  transfer  there  has  arisen  a  marvelous, 

45 


46  MODERN   ECONOMIC  TENDENCIES 

a  quite  incomprehensible,  rate  of  material  productivity.  Trite 
as  is  the  effort  to  find  adjectives  fit  to  express  the  wealth  of 
to-day,  as  compared  with  that  of  two  generations  ago,  yet  the 
duty  may  not  be  omitted  here  to  impress  upon  the  reader  the 
fact  that  this  increase,  during  the  last  seventy  years,  has  been 
little  short  of  the  miraculous.  Still  more  must  it  be  empha- 
sized that  this  increase  has  been  simultaneous  with  the  shift 
from  the  cottage-system  to  the  factory-system  of  production. 

Just  how  much  richer  we  are  to-day  than  seventy  years  ago 
we  cannot  say,  for  of  many  of  the  things  in  which  we  are  now 
so  rich  we  then  had  none.  All  we  can  do  is  to  admit,  as 
axiomatic,  that  the  ratio  of  increase  has  been  tremendous,  and 
that  it  has  been  a  result  of  the  adoption  of  the  factory-system. 

It  is  safe  to  say  that  not  a  serious  mind  in  the  land,  in  either 
commercial  or  professional  life,  would  dare  to  doubt  this  re- 
lationship of  cause  and  effect,  nor  to  advocate  a  return  to  the 
pristine  cottage-system  of  production.  Certainly  if  any  college- 
professor  or  theorist  in  economics  should  urge  any  such  doctrine, 
he  would  be  cordially  attacked,  or  at  least  ignored  completely, 
by  every  practical  man  of  affairs. 

The  Cottage-system  Obsolete. — It  is  first  to  be  noted  that  the 
disappearance  of  the  cottage-system  is  now,  and  has  been  for 
some  years,  practically  complete.  However  we  may  discover, 
later  in  this  analysis,  that  much  remains  to  be  done  in  the  way 
of  a  complete  adoption  of  the  factory-system,  its  predecessor  is 
surely  already  dead  and  gone.  It  is  universally  agreed  amongst 
economists  that  no  workman  adhering  to  the  cottage-system 
can  possibly  compete  with  his  fellows  in  the  factory-system, 
and  live. 

In  the  sweatshop,  it  is  true,  there  still  persists  a  queer  rem- 
nant of  the  forms  of  the  cottage-system,  carried  on  really 
under  an  impure  form  of  the  factory-system;  but  it  is  uni- 
versally regarded  as  an  unwholesome  and  unwelcome  survival 
of  the  archaic,  in  both  its  economic  and  its  ethical  results.  In 
the  fancy  work  of  the  lady  of  leisure,  or  in  hand-knitting  for 
the  army,  lies  another  fossilized  specimen  of  the  extinct  system. 
But  in  every  other  walk  of  industry  productive  labor  is  synony- 
mous with  special,  undomestic  premises,  and  all  the  other  at- 
tributes of  the  factory-system.  Even  literature  to-day  is  con- 
ducted usually  in  a  business-like  office,  near  the  public  library  of 
a  great  city,  instead  of  in  a  private  library  in  a  home  on  a 


THE   COTTAGE-SYSTEM   AND   THE   FACTORY-SYSTEM  47 

shady  street,  as  was  true  of  the  foundations  of  American  letters. 

All  this  being  so,  it  becomes  of  paramount  importance  to 
inquire  most  carefully  as  to  the  exact  contrast  between  the  cot- 
tage- and  the  factory-systems.  The  former,  in  its  simplicity, 
has  already  been  sufficiently  defined.  But  what  is  a  factory- 
system?  The  collection  of  mere  buildings  and  machines  called 
a  factory  is  easy  to  see  and  understand;  but  just  what  is  the 
modern  factory-system,  as  an  institution? 

The  Modern  Factory-system. — The  following  definition  of 
the  factory-system  is  taken  from  Bogart,  whose  excellent  history 
of  American  industrial  progress  may  be  relied  upon  for  many 
facts,  and  represents  the  prevailing  view  of  the  most  intelligent 
class  of  public  opinion: 

"By  the  factory-system  is  meant  the  concentration  of  all 
the  processes  of  manufacture  in  a  factory,  involving  their 
withdrawal  from  the  household  and  shop  where  they  had 
previously  been  carried  on;  it  involves  also  the  organization 
of  the  workers  under  skilled  management,  for  stipulated 
wages  and  fixed  hours,  with  production  for  the  general  market 
and  not  upon  order." 

But  this  definition  is  far  from  satisfactory.  It  is  based  in 
the  first  place  upon  a  distinction  as  to  locality;  whereas  locality, 
as  will  be  seen  shortly,  is  quite  an  incidental  feature.  The 
factory-system  is  universally  relied  upon,  for  instance,  in  busi- 
ness-offices; or  it  may  be  carried  on  in  the  home,  as  in  the  case 
of  much  dress-making  and  some  literary  work ;  while  the  sweat- 
shop system,  which  is  always  carried  on  in  the  home,  is  a  much 
nearer  approach  to  the  factory-system  than  to  the  cottage- 
system. 

The  items  of  superintendence  and  stipulated  wages  are 
features  essential  to  the  factory-system,  it  is  true,  and  "fixed 
hours"  is  usually  so.  But  the  distinction  drawn  between  work 
for  the  general  market,  in  contrast  with  working  upon  order, 
has  naught  to  do  with  the  real  difference  between  the  two 
systems. 

Origin  of  the  Factory-system. — Historically  speaking,  the 
factory  arose  originally  from  the  cottage-system  through  the 
invention  of  power-looms,  the  steam-engine,  accurate  machine- 
tools,  huge  cranes,  etc.  To-day  it  comprises  an  all  but  incom- 
prehensible variety  of  costly,  powerful  or  delicate  appliances. 


48  MODERN   ECONOMIC   TENDENCIES 

But  it  is  the  invention  of  these,  and  not  any  deliberate,  in- 
telligent perception  of  the  valuable  possibilities  of  the  factory 
as  a  system  of  industry,  which  forced  society  into  its  reluctant 
adoption.  This  automatic,  involuntary  adoption  of  the  factory- 
system  was  one  of  the  first  of  the  many  instances  which  this 
investigation  will  uncover,  of  society's  taking  its  forward  steps 
in  evolution  quite  without  any  deliberate  intent,  or  even  any 
consciousness  of  the  direction  in  which  it  was  striding. 

For,  this  adoption  of  the  factory,  as  a  thing  inevitable  if  we 
are  to  make  use  of  modern  inventions,  once  having  been  ac- 
complished automatically  and  blindly,  society  has  only  awak- 
ened gradually  to  the  realization  that  the  value  obviously  there 
was  inherent  in  the  factory-system,  as  a  thing  quite  apart  from 
the  mechanism  of  the  factory.  In  reality  the  greatest  poten- 
tialities of  the  factory-system,  as  a  system,  rest  upon  features 
quite  other  than  its  tangible  appliances.  These  features  are 
ones  of  organization,  rather  than  implement. 

Thus  the  factory-system  is  used  to-day  to  impart  efficiency 
to  many  enterprises  which  make  no  appreciable  use  of  those 
appliances  which  forced  that  system  into  adoption.  Steno- 
graphic and  accounting  forces,  frequently  involving  hundreds 
or  thousands  of  operatives,  are  universally  organized  upon  the 
factory-system,  although  they  use  neither  power  nor  costly  tools. 
Libraries  and  colleges,  the  post-office  and  the  public  schools, 
and  the  rapidly  expanding  administrations  of  our  cities,  state 
and  nation,  are  all  now  operated  upon  the  factory-system. 

Everywhere  this  system  has  been  tried  its  efficiency  has  been 
proven  and  its  further  adoption  insured.  It  has  spread  over 
the  entire  face  of  the  globe.  The  populations  which  have 
adopted  it  have  everywhere  multiplied  like  rabbits  and  flour- 
ished like  the  wicked. 

Distinguishing  Peculiarities  of  the  Factory-system.— It  is 
therefore  very  much  in  order  to  inquire  most  carefully  what 
it  is  about  the  factory-system,  as  a  system,  which  differs  from 
other  known  methods  of  organizing  production.  To  the  steam, 
hydraulic  and  electric  prime  movers,  the  huge  cranes,  the 
ponderous  tools,  the  hordes  of  noisy  looms  and  the  intricate 
delicacy  of  electric  communicative  apparatus  due  credit  must 
be  given.  But  this  still  leaves  unexplained  some  huge  gains 
which  are  peculiarly  due  to  the  particular  form  of  organization 


THE   COTTAGE-SYSTEM  AND  THE  FACTORY-SYSTEM  49 

adopted,  which  has  now  become  the  prime  characteristic  of  the 
factory-system. 

Not  only  are  these  organizational  advantages  superior  in  im- 
portance to  the  mechanical  features  of  the  factory.  We  shall 
see  later  that  the  intricate  collection  of  appliances  could  not 
function  at  all,  unless  backed  by  the  peculiar  method  of  or- 
ganization which  has  become  linked  therewith  wherever  factories 
are  used,  regardless  of  continent,  climate,  form  of  government, 
or  literacy  or  illiteracy  of  personnel. 

The  Factory-system  a  Matter  of  Organization. — The  signifi- 
cant contrast,  then,  between  the  archaic,  obsolete  cottage-system 
and  the  modern  factory-system,  explaining  the  all  but  incredible 
progress  in  material  productivity  accomplished  during  the  last 
century  or  so,  is  not  primarily  one  of  form  of  appliances  used, 
but  rather  one  of  organizational  methods.  This  contrast  in 
organizational  methods  is  at  least  four-faced  in  its  nature. 

(1)  Ownership  of  tools,  materials  and  product  on  the  part  of 
the  workman  has  disappeared,  and  possession  has  taken  its  place. 
Whereas  the  workman  under  the  cottage-system  had  to  own 
both  tools  and  raw  materials  before  he  could  begin  his  work, 
and  then  owned  the  product  also,  which  he  must  sell  before  he 
could  enjoy  what  corresponds  with  modern  wages,  the  workman 
under  the  factory-system  is  never  allowed  to  own  either  tools, 
raw  material  or  product. 

(2)  Competition  has  been  replaced  by  monopoly.    Under  the 
cottage-system  the  workman  was  responsible  for  finding  his 
own  work,  and  for  keeping  it.     Under  the  factory-system,  the 
workman  once  assigned  a  job  is  never  allowed  to  engage  in 
struggle  to  keep  it.     He  is  not  allowed  to  struggle  to  secure 
it.     No  other  workman  is  allowed  to  question  his  right  to  his 
job.     The  explanation  of  the  success  of  the  factory-system  is 
that,  under  its  peculiarities,  and  chiefly  the  first  one  listed 
above,  no  other  workman  is  ever  tempted  to  even  try  to  get  his 
job  away  from  him. 

This  is  so  because  nowhere  in  any  factory  is  duplication  of 
service  permitted.  Only  one  of  each  department  of  effort — one 
foundry,  one  machine-shop,  etc. — is  permitted,  as  contrasted 
with  twenty  such,  competing  with  each  other,  prevailing  in  the 
cottage-system. 

(3)  Credit  is  universally  advanced,  in  the  form  of  costly 
appliances  intrusted  to  workman  for  the  good  of  society,  without 


50  MODERN    ECONOMIC    TENDENCIES 

the  exaction  of  either  security  or  interest-charge.  The  only  thing 
required  is  proof  of  sobriety  and  industry  of  character,  and 
suitable  craftsman's  skill. 

(4)  Specialization  of  effort,  and  hence  continual  interchange 
of  material,  are  carried  to  the  extreme  degree  possible.  But 
this  last  phase  of  the  factory-system,  it  must  never  be  forgotten, 
would  be  quite  unattainable,  in  spite  of  the  assistance  of  a  whole 
profession  of  "efficiency-engineers"  as  designers  of  fluidity  of 
effort,  were  it  not  for  the  presence  of  those  features  of  organiza- 
tion preceding  this  last  in  the  list. 

For  instance,  the  size,  power,  speed  and  delicacy  of  the 
modern  steamship  has  become  possible  only  as  we  have  adopted 
the  policy  of  intrusting  it  to  a  non-owning,  salaried  commander, 
without  waiting  for  him  to  acquire  its  ownership  under  hope  of 
private  gain.  China,  Australia  and  New  York  have  come  into 
intimate  touch  with  each  other  not  merely  because  steam  has 
displaced  sail.  The  steamship  could  never  have  replaced  the 
sailing-vessel  had  we  not  abolished  the  all  but  universal  prac- 
tice of  ownership,  in  every  step  of  construction  and  operation, 
which  was .  characteristic  of  our  merchant  marine  of  two  gen- 
erations ago. 

Specialization  and  Interchange. — In  reviewing  these  con- 
trasts between  the  organization  of  the  obsolete  cottage-system 
and  the  successful  modern  factory-system,  the  order  of  listing 
given  above  will  not  be  followed.  This  is  done  because  the  list 
runs  in  order  of  relative  importance.  But  the  degree  of  familiarity 
in  the  public  mind  is  in  exact  reverse  from  this.  The  feature  of 
specialization,  which  is  quite  dependent  upon  the  features  of 
ownership,  monopoly  and  credit  peculiar  to  the  factory,  is  the 
one  most  familiar  in  debate.  Therefore  it  will  be  considered 
first. 

Although  labor  under  the  cottage-system,  or  even  under  the 
feudal  system  which  preceded  it,  was  specialized  to  a  degree, 
men  being  known  even  then  as  bakers,  carpenters,  etc.,  yet  the 
modern  factory-system  carries  specialization  to  a  degree  far 
beyond  that  possible  in  the  cottage- system.  Every  factory-hand, 
even  if  unskilled,  specializes  upon  less  than  what  was  formerly 
a  single  trade. 

The  modern  shoe-maker,  for  instance,  knows  nothing:  of  real 
shoe-makinsr.  He  may  operate  an  "insole-tacking-machine"  or 
the  like,  which  performs  only  one  little  part  in  making  a  shoe, 


THE    COTTAGE-SYSTEM   AND   THE    FACTORY-SYSTEM  51 

and  he  knows  nothing  about  all  the  other  steps  in  the  process. 
A  single  publication  of  the  United  Shoe  Machinery  Company 
describes  fifty  or  an  hundred  different  successive  machine- 
processes,  combined  to  form  the  mere  putting  together  of  a 
shoe;  and  that,  too,  from  ready-made  parts,  such  as  soles,  uppers, 
vamps,  counters,  etc.,  each  of  which  had  been  supplied  from  a 
factory  of  its  own,  and  each  representing  its  own  string  of 
distinct  machine-processes  embodied  in  it. 

The  "hand"  who  operates  any  one  of  these  several  mechanical 
processes,  in  any  one  of  the  row  of  factories  through  which 
untanned  leather  (for  the  tannery  itself  is  another  such  a  com- 
bination of  processes)  passes  upon  its  way  to  become  a  com- 
plete shoe,  has  been  forced  into  a  degree  of  specialization  un- 
dreamed in  the  days  of  cottage-industry.  It  is  a  degree  which 
is  virtually  unimaginable,  even  to-day,  by  that  vast  mass  of 
readers  whose  lives  have  never  carried  them  appreciably  within 
factory-walls.  It  is  unimaginable  even  to  the  factory-hand  or 
corporation-official,  because  his  work  carries  him  into  contact 
with  as  small  a  portion  of  this  whole  as  an  enlisted  man  sees 
of  a  military  campaign  in  which  he  takes  part. 

Ownership  versus  Possession. — Since  this  degree  of  specializa- 
tion has  become  possible  only  as  the  feature  of  ownership  has 
departed  from  our  industrial  system,  replaced  by  possession  and 
factory-credit  instead,  these  topics  must  be  given  important 
emphasis. 

The  prime  characteristic  of  the  primitive,  inefficient  and  now 
obsolete  cottage-system,  in  contrast  with  the  far  superior  fac- 
tory-system which  has  superseded  it  all  over  the  world,  by 
survival  of  the  fittest,  is  that  in  the  former  the  institution  of 
personal  property  was  everywhere  obvious  and  inseparable.  It 
was  intimately  interwoven  and  identified  with  industry  at  every 
step.  The  shoe-maker,  for  instance,  not  only  aways  did  own, 
but  he  always  must  own,  his  own  tools,  thread,  lasts,  etc.,  before 
he  could  enter  upon  the  practice  of  his  trade.  Then  he  must 
buy  his  own  leather  before  he  might  begin  actual  work.  After 
he  had  completed  it  he  inevitably  owned  the  finished  product. 
Finally,  he  himself  must  sell  it,  usually  to  its  Ultimate  Con- 
sumer, before  he  could  enjoy  any  "wages"  for  his  labor.  His 
work  was  bonded  at  every  step  with  his  personal  property-rights 
therein. 

To  this  rule  there  was  never  any  exception,  aside  from  the 


52  MODERN   ECONOMIC  TENDENCIES 

gradual  outcropping  of  the  factory-system,  in  sporadic  cases, 
as  it  began  its  extermination  of  the  cottage-system.  Indeed,  so 
universal  and  basic  is  this  distinction — of  ownership-in-industry 
as  characteristic  of  the  cottage-system,  and  of  non-ownership 
as  characteristic  of  the  factory-system — that  it  must  be  accepted 
as  one  of  the  two  or  three  determinative  tests  for  defining  where 
one  system  ends  and  the  other  begins.  In  comparison  with 
this  criterion  all  tangible  differences  as  to  tools,  materials, 
premises,  power,  and  form  of  pay  sink  into  a  secondary  position 
as  accidental  and  unimportant  details. 

Modern  Abolition  of  Property-rights. — For  it  is  a  universal 
characteristic  of  the  modern  factory-system,  to  which  there  is 
no  exception  whatever,  that  within  its  precincts 

All  Property-rights  Have  Been  Abolished, 

so  far  as  concerns  anything  to  do  with  the  factory  and  its  work. 

This  is  not  saying  that  property  has  been  confiscated.  It  is 
merely  saying  that  the  institution  as  a  whole  has  been  abolished. 
It  is  not  needed.  No  one  is  conscious  of  its  absence. 

No  question  of  "mine"  or  "thine"  is  ever  permitted  to  arise 
within  the  factory-premises.  No  one  within  the  factory,  so 
far  as  the  conduct  of  the  day's  work  is  concerned,  is  ever  per- 
mitted to  own  either  the  raw  material  worked  upon,  the  tools 
with  which  it  is  transformed,  or  the  product  finished  by  the 
laborer's  effort;  and  no  one  feels  the  need  or  desire  for  any 
such  an  ownership.  Everything,  it  is  taken  for  granted,  be- 
longs to  the  factory,  exists  for  the  factory  and  is  to  be  used 
by  anyone  who  can  contribute  thereby  to  the  good  of  the  little 
factory-community. 

For  the  modern  factory-system  has  adopted  completely  and 
exclusively  that  maxim  of  Prudhomme's  so  often  half  quoted, 
so  universally  detested  by  the  conservatives  in  their  philosophy, 
yet  so  sacredly  treasured  in  the  bosom  of  their  industrial 
premises  and  their  daily  administrative  acts:  "Property  is 
robbery ;  possession  is  liberty."  For  every  factory-owner  or  em- 
ployer of  labor,  on  any  sort  of  premises  whatever,  approves 
enthusiastically  and  maintains  universally,  just  so  far  as  his 
authority  can  be  extended  by  law,  a  system  by  which  free 
possession  and  use  of  anything  in  the  factory  is  guaranteed  to 
every  man,  provided  merely  that  he  be  capable  of  making  use 


THE   COTTAGE-SYSTEM  AND   THE   FACTORY-SYSTEM  53 

of  it,  while  property-ownership  therein  is  absolutely  denied  to 
anyone. 

The  men  sitting  at  the  benches  or  machines  may  own  the 
money  in  their  pockets,  of  course,  or  the  home  left  behind  them ; 
but  these  form  no  part  of  the  factory  and  have  nothing  to  do 
with  the  day's  work.  The  factory-system  begins  where  ends  the 
institution  of  ownership  on  the  part  of  the  worker. 

So  far  as  the  function  of  the  factory  is  concerned,  private 
ownership  has  already  been  abolished  as  completely  as  has  the 
cottage-system  of  industry.  Community-use,  as  a  basic  institu- 
tion, has  been  substituted  for  that  of  private  property,  by  the 
authority  of  all  employers  of  labor. 

To  this  statement  there  can  be  no  exception.  We  are  refer- 
ring here  not  merely  to  a  major  sentiment  of  the  business- 
community.  This  policy  initiated  and  adopted  by  the  proper- 
tied men-of-affairs  of  the  country,  to  prohibit  all  ownership- 
in-industry  on  the  part  of  those  engaged  in  it,  is  universal. 
There  has  never  been  a  tenet  of  orthodox  religious  faith  which 
has  been  regarded  with  greater  or  more  universal  sanctity  than 
is  enjoyed  by  this  rule — that  of  exclusion  from  modern  in- 
dustry of  all  ownership  by  the  workers. 

Sporadic  Cases  of  Profit-sharing. — The  relatively  slight 
introduction  of  the  plan  of  profit-sharing,  it  need  be  merely 
remarked  here,  has  not  been  overlooked  in  making  these  state- 
ments. It  will  receive  attention  later. 

Competition  versus  Monopoly. — The  second  characteristic  of 
the  cottage-system,  as  contrasted  with  the  factory-system,  lies 
in  the  fact  that  every  workman  under  the  cottage-system  had  to 
fight  for  his  job.  He  had  no  certainty  of  tenure  of  it  when 
secured,  nor  certainty  of  pay  for  his  work  when  done.  Any 
other  workman  was  free  to  strive  to  parallel,  invade  or  under- 
mine his  efforts.  Any  honest,  skillful  workman  was  liable  at 
any  time  to  find  that  his  labor  had  become  worthless  upon  his 
hands,  because  some  other  workman  had  duplicated,  in  part 
or  whole,  his  efforts,  or  had  surpassed  him  in  ability  to  find 
a  customer,  if  not  in  doing  the  work. 

The  result  of  this  universal  license  to  compete  was  that  the 
workman  often  suffered  from  work  unpaid — not  because  the 
Consumer  would  not  pay,  but  because  he  would  not  buy — while 
the  community  suffered  from  duplicated  and  wasted  efforts. 
The  first  lowered  the  average  "wage."  The  latter  entailed  high 


54  MODERN   ECONOMIC   TENDENCIES 

prices.  The  only  thing  gained  by  this  competition  was  a  rough 
assurance  that  the  price  would  rise  no  higher  (above  the 
natural  price)  than  was  compatible  with  the  presence  of  these 
two  costly  wastes. 

In  the  factory-system,  on  the  other  hand,  this  situation  is 
exactly,  deliberately  and  carefully  reversed.  The  factory-system 
and  its  efficiency  rest  basically  and  openly  upon  universal 
monopoly.  Every  workman,  when  once  assigned  a  job  by  the 
Central  Office  or  Superintendent,  performs  it  uninterrupted  in 
his  tenure  thereof,  unparalleled  by  any  other  workman,  and 
undisturbed  by  doubt  as  to  his  pay.  No  one  may  take  his  job 
away  from  him,  nor  may  even  try  to  do  so.  No  one  may  deny 
him  his  wages  when  done.  His  protection  in  these  things  is 
maintained  with  scrupulous  care. 

Whatever  deficiencies  may  be  discovered  in  the  factory-system 
in  other  lines,  as  this  analysis  progresses,  or  whatever  oppres- 
sion of  the  workingman  may  be  found  to  arise  through  uncer- 
tainty as  to  his  admission  into  the  factory-system  at  all,  or  in 
continuity  of  employment,  or  whatever  may  be  the  deficiencies 
in  the  purchasing-power  of  his  wages  after  he  has  gotten  them, 
these  points  of  superiority  over  the  old  cottage-system  in  pro- 
ductivity, just  listed — when  once  the  workman  is  at  work  within 
the  factory — must  be  admitted  and  emphasized.  There  he 
enjoys  assurance  of  a  monopoly  of  his  job.  The  community 
enjoys  the  efficiency  of  having  him  work  undistracted  and  un- 
interruptedly, without  duplication  of  his  efforts  by  one,  ten 
or  fifty  others.  He  is  certain  of  his  pay,  whatever  it  may  be, 
whenever  honest  effort  may  have  been  completed,  and  without 
awaiting  the  collection  of  the  value  of  what  he  has  produced 
from  its  Ultimate  Consumer. 

In  all  of  these  respects  the  factory-system  has  proven  itself 
a  great  advance  over  any  of  the  systems  of  organizing  effort 
which  have  preceded  it  in  history.  In  assigning  credit  for  the 
wonderful  modern  expansion  of  human  productivity,  the  bulk 
of  it  must  be  allotted  to  these  and  other  features,  to  be  described 
later,  which  are  broadly  peculiar  to  the  factory-system.  A  better 
understanding  of  these  will  be  given  in  the  next  chapter. 


PART  II 
ECONOMIC   PRINCIPLES 


CHAPTER  IV 

PRODUCTION 

Definition. — The  word  production  will  be  used  in  this  book 
to  include  all  effort,  whether  of  brawn  or  of  brains,  which  aids 
in  transforming  the  raw  materials  of  the  soil,  the  sea,  the  forest 
and  the  mine  into  commodities  or  service  which  are  of  real 
life-support  to  the  Ultimate  Consumer,  and  their  transporta- 
tion and  subdivision  into  retail-units  delivered  into  his  hands, 
for  his  destruction  thereof  in  the  conduct  of  his  life.  It  applies 
to  everything  needed  for  the  support  and  growth  of  human  life 
—food,  clothing,  shelter,  transportation,  communication,  educa- 
tion, amusement  and  inspiration  —  manual  labor,  superin- 
tendence and  invention  alike. 

It  must  include  not  only  all  effort  expended  in  maintaining 
the  necessary  current  supply  of  things  of  standard  kinds,  but 
also  all  effort  aimed  at  the  extension  of  facilities  or  appliances 
into  new  scales  of  operation. 

Criterion  as  to  the  true  production  of  life-support  for  the 
community  plainly  must  pivot  upon  the  reality  of  the  aid 
embodied  in  any  commodity  or  service,  for  supplying  to  the 
Consumer  what  he  selects  at  the  retail-counter,  and  must  not 
be  misled  by  any  mere  supposition,  upon  any  person's  part,  that 
a  thing  aids  when  in  reality  it  does  not.  That  is  to  say,  we  are 
dealing  here  with  physical  realities,  rather  than  with  human 
delusions  concerning  them. 

We  shall  exclude  from  this  discussion,  however,  all  moral 

55 


56  MODERN   ECONOMIC   TENDENCIES 

delusions,  as  contrasted  with  economic  delusions.  This  book 
is  a  study  in  sociology,  not  one  in  psychology  or  morality. 

Thus,  for  instance,  alcoholic  drink  and  horse-racing  are  re- 
garded by  many  as  immoral  and  dissipative.  Yet  in  this  book 
the  effort  directed  toward  producing  alcohol  or  race-horses  will 
be  classed  as  productive.  This  is  not  because  these  things 
necessarily  promote  life,  but  because  the  Consumer  thereof, 
when  he  patronizes  them,  knows  that  he  is  doing  so. 

He  has  therefore  asserted  a  true  economic  demand  for  them. 
Whatever  delusion  as  to  their  value  for  his  life-support  may 
be  involved,  is  housed  within  his  own  brain,  and  not  in  the 
social  structure. 

But,  on  the  other  hand,  effort  directed  toward  the  printing 
of  the  appurtenances  of  stock-gambling,  for  instance,  will  be 
classed  as  unproductive  and  dissipative  of  social  energy.  This 
is  not  because  either  the  printer  or  the  broker  is  necessarily 
immoral,  but  because  the  man  who  pays  the  cost  of  stock- 
gambling — who  is  neither  the  printer,  the  broker  nor  even  the 
lamb,  but  some  "Ultimate  Consumer  of  coffee-mills  in  Montana 
— is  not  aware  of  that  fact  when  he  devotes  his  money  to  en- 
couraging stock-gambling;  nor  has  lie  the  power  to  stop  it  if 
he  would. 

Subconscious  Social  Action. — His  economic  act  is  therefore 
neither  free  nor  conscious;  it  is  automatic  and  subconscious. 
His  delusion  is  not  a  personal  one,  due  to  willful  ignorance  or 
immorality,  as  many  believe  is  the .  case  with  the  patron  of 
alcohol  or  horse-racing,  but  is  one  enforced  upon  him  by  our 
lack  of  organization  of  our  economic  community.  Both  his 
ignorance  of  the  true  result  of  his  act,  and  his  impotence  to 
remedy  or  modify  that  result,  are  thrust  upon  him  by  society. 

It  is  this  sort  of  subconscious  economic  dissipation  of  pro- 
ductive possibilities  in  which  we  are  alone  interested  here. 
That  involved  in  personal  immorality  is  to-day  distinctly  sec- 
ondary to  this,  and  is  the  concern  of  preachers,  teachers  or 
psychologists,  rather  than  of  sociologists.  We  are  not  arguing 
that  it  is  harmless,  but  that  it  lies  outside  our  topic. 

The  Motive  Force  of  Production. — Modern  material  produc- 
tivity, in  this  sense,  is  virtually  all  of  it  carried  on  in  response 
to  the  stimulus  of  pecuniary  income.  That  is  to  say,  however  a 
man  may  disregard  pecuniary  considerations  in  order  to  be  a 
scientist,  an  artist,  a  patriot  or  a  preacher — and  however  these 


PRODUCTION  57 

callings  may  be  of  great  productivity  in  the  broader  sense  of 
the  term — it  is  still  true  that  whatever  effort  he  gives  to  pro- 
duction in  its  routine  sense  is  in  defiance  of  these  personal, 
non-economic  preferences. 

Conversely,  whatever  he  gives  to  altruistic  aims  must  be  done 
in  defiance  of  economic  considerations.  However  profitable  to 
society  in  general  altruism  may  be  in  the  long  run,  in  the  short 
run  it  is  never  profitable  to  the  individual. 

Those  things  which  we  do  solely  in  order  to  gain  money  may 
be  devoted  to  society's  good  in  one  sense,  it  is  true,  but  it  is 
wholly  a  subconscious  sense.  For  the  body  economic  has  its 
subconscious  functions  as  surely  as  the  physical  body  has.  These 
automatic,  routine,  subconscious,  productive  processes  of  eco- 
nomic society  bear  the  same  important  relation  to  its  conscious 
altruism  as  the  subconscious  heart-beats  of  a  preacher  bear  to 
his  inspiring  sermons. 

Economic  Determinism. — When  one  turns  away  from  his 
ethical  or  altruistic  instincts,  to  heed  this  economic  pressure 
for  the  daily  necessities  of  life,  he  will  always,  in  the  long  run, 
turn  toward  those  tasks  which  are  best  rewarded  in  the  pecuni- 
ary sense.  The  day  has  long  gone  by  when  economic  produc- 
tion, in  any  appreciable  degree,  is  guided  or  promoted  by  the 
desire  of  the  doer  for  what  he  produces.  The  worker  who  clings 
to  this  idea  starves,  however  he  may  help  humanity. 

All  modern  degrees  of  productivity  are  attained  only  through 
the  specialization  of  each  worker  to  an  extreme  degree,  whereby 
he  produces  enormous  quantities  of  some  single  thing  for  which 
he  has  no  desire  whatever,  in  order  to  interchange  this  produce 
for  an  equally  enormous  variety  of  smaller  quantities  of  other 
commodities,  made  by  other  producers.  This  is  the  modern 
system,  which  no  man  may  defy  and  long  survive. 

In  its  operation  psychology  and  ethics  enter  scarcely  at  all. 
The  producer  does  not  move,  in  his  selection  of  work,  in  response 
to  his  sentiments,  but  under  command  of  his  intellect,  guiding 
him  whither  the  pay  is  best.  His  tastes,  it  is  true,  find  proper 
outlet  when,  in  the  role  of  Ultimate  Consumer,  he  comes  to 
select  his  purchases;  but  in  the  selection  or  performance  of 
his  productive  work  his  psychology  falls  into  a  place  quite  sec- 
ondary to  his  reason. 

Modern  Automatic  Invohmtariness. — When  one  turns  to  the 
question:  What  is  it  which  determines  the  aggregate  volume 


58  MODERN  ECONOMIC  TENDENCIES 

of  energy  devoted  to  production?  one  gets  his  first  lesson  as 
to  this  involuntariness  of  all  modern  social  phenomena.  And 
also  as  to  their  subconsciousness. 

That  is  to  say,  in  the  simpler  life  of  the  individual  hermit 
the  motive  forces  of  life  are  all  simple,  obvious,  direct  and 
voluntary.  When  one  is  hungry,  one  works;  when  tired,  one 
rests.  That  is  the  delight  of  the  hermit-life.  At  every  turn 
the  will  decides  its  preference,  and  then  executes  it.  The  result 
is  what  was  consciously  intended. 

But  under  modern  social  conditions  life  is  quite  otherwise. 
It  is  almost  the  exact  opposite  from  this. 

To-day  it  is  obvious  at  a  glance  that  very  few,  if  any,  do 
what  they  please  in  the  industrial  world.  Those  who  are  plainly 
suffering  from  fatigue  continue  to  overwork  until  they  drop — 
for  the  alternative  is  complete  idleness  and  want.  Those  who 
direly  need  supplies,  and  who  plainly  are  sincerely  seeking  work, 
often  are  forced  to  remain  idle.  Those  who  need  exercise  above 
all  things  continue  in  overfed  sloth — in  spite  of  splendid  gym- 
nasiums, sanatariums  and  "health-farms,"  built  expressly  to 
tempt  that  muscular  exertion  which  never  ought  to  need  tempta- 
tion— until  they  die  of  apoplexy  or  hardened  arteries.  In  no 
direction  are  the  reactions  of  the  individual  motor-nerves  to 
the  visible,  external  stimuli  either  natural  or  free. 

Volume  of  Production. — Such  is  also  plainly  the  case  with 
production  as  a  whole,  as  carried  on  within  our  aggregate  na- 
tional factory-system.  It  is  not  spontaneous  and  natural,  but 
forced.  Let  society  once  adopt  an  economic  system  in  which 
interchange  is  made  a  function  pre-essential  to  production  and 
consumption — as  society  has  done  subconsciously  and  perforce 
when  it  encouraged  modern  invention — and  from  that  time  for- 
ward it  is  irrevocably  and  uncontrollably  the  possibility  of  in- 
terchange, and  not  the  mere  human  desire  for  production  or 
consumption,  which  becomes  the  determining,  dominant  factor 
in  all  questions  of  industry  or  idleness. 

This  is  distinctly  true  of  all  modern  production.     To-day 


Nothing  Can  Be  Produced  Unless  It  Can  Be  Sold. 

It  is  the  selling-office  and  the  retail-agency  which  dominate  and 
direct  the  activities  of  every  factory,  large  or  small.    It  is  the 


PRODUCTION  59 

particular  quality  and  quantity  which  can  be  sold  which  alone 
can  be  made. 

Let  any  person  or  factory  attempt  to  defy  this  law,  by  pro- 
ducing that  which  cannot  be  sold,  and  loss  to  all,  rather  than 
gain,  is  the  result.  Production  has  not  been  performed.  Life- 
support  has  not  been  created. 

The  thing  thus  produced  cannot  enrich  society,  because  so- 
ciety cannot  make  use  of  it.  It  cannot  enrich  the  producer, 
because  every  producer  starves  on  his  own  produce;  he  needs 
something  quite  different.  Whether  it  be  apples  and  cabbages 
rotting  on  the  ground  within  a  few  miles  of  congested,  starving 
cities,  or  vacant-lot  truck-gardens  which  force  the  professional 
farmer  to  leave  some  of  his  produce  unsold,  or  labor  often 
enforcedly  idle,  it  is  alike  an  illustration  of  the  modern  fact 
that  that  which  cannot  be  sold  might  as  well  never  have  been 
created. 

The  Determinant  of  Volume  of  Production. — The  law  which 
determines  the  aggregate  volume  of  production  at  any  time, 
therefore,  is  the  quotient  reached  by  dividing  the  aggregate 
purchasing-power  of  the  people  by  the  average  price  of  com- 
modities. This  law  is  rigid  and  relentless.  Unless  we  either 
increase  the  purchasing-power  of  the  people,  or  lower  the  price 
of  things  offered  on  the  retail  shop-counter,  we  are  helpless  to 
increase  the  volume  of  production. 

Exhortations  by  the  government  to  "produce  and  save,"  the 
stimulus  of  ambition,  the  prod  of  hunger,  the  pride  of  ap- 
pearance, the  keen  stab  of  suffering  on  the  part  of  loved  ones — 
all  of  these  ethical  forces,  and  every  other  such  imaginable,  all 
alike  have  their  edges  turned  and  dulled  into  impotence  against 
the  steel-clad  walls  of  this  law.  From  it  there  is  absolutely  no 
appeal. 

In  short,  we  are  constantly  being  exhorted  to  economize  in  the 
use  of  some  commodity  or  other,  such  as  coal,  sugar,  etc.,  upon 
the  unquestioned  assumption  that  the  volume  of  production  is 
either  fixed,  or  is  determined  by  some  mysterious,  unknown 
factor.  Hence,  it  is  argued,  the  less  we  use  the  greater  surplus 
shall  we  possess,  and  hence  the  greater  the  tendency  for  prices 
to  drop  and  supplies  to  increase. 

Yet  for  all  this  assumption  there  is  to  be  found  not  one  grain 
of  support  in  the  economic  facts.  To  the  economist  it  seems 
really  fantastic.  Our  volume  of  production  is  not  fixed,  but 


60  MODERN  ECONOMIC  TENDENCIES 

fluctuates  widely,  wildly,  in  response  to  purely  human  (al- 
though not  individual,  conscious  nor  voluntary)  forces.  In 
its  determination  the  prime  factor  is  actually  the  current  volume 
of  consumption.  Our  rate  of  production  is  determined  by  the 
volume  of  our  consumption,  not  our  consumption  by  our  pro- 
duction. 

Outlining  briefly  a  complex  situation  which  will  be  studied 
in  detail  as  we  proceed,  it  may  be  stated  that,  always  remem- 
bering the  fact  that  only  that  may  be  consumed  which  first  can 
be  purchased,  the  dependence  of  production  upon  consumption 
is  one  of  the  basic  laws  of  economic  equilibrium.  Price,  we 
shall  see  in  the  later  chapter  devoted  to  that  topic — that  is, 
average  price-level  in  general,  as  contrasted  with  relative  price 
of  one  commodity  in  terms  of  another — is  not  determined  by 
supply  and  demand,  and  therefore  controllable  by  the  surplus 
of  a  voluntary  supply  over  a  voluntary  consumption,  at  all.  If 
that  were  so,  our  problems  would  be  simple. 

Instead,  prices  are  determined  first  by  factors,  yet  to  be  ex- 
plored, which  are  all  but  independent  of  supply  and  demand. 
So  is  the  purchasing-power  of  the  people.  The  balance  between 
these  two  factors  then  determines  the  volume  which  can  be 
bought  and  consumed.  This  determines  the  volume  which  can 
be  produced  and  sold. 

None  of  these  factors  is  voluntary,  nor  conscious,  nor  subject 
to  control  by  exhortation.  The  people  always  desire  to  consume 
far  more  than  they  can.  They  always  buy  up  to  the  limit  of 
their  purchasing-power.  The  producers  always  desire  to  earn 
and  spend  all  they  can.  The  restraint  upon  each  of  these  func- 
tions has  never  resided  in  the  will,  but  solely  in  those  abstract, 
subconscious,  relentless  laws  of  economic  action  and  reaction 
just  outlined.  These  laws  it  is  our  duty  to  explore  with  care. 

To-day,  since  businessmen  are  everywhere  finding  themselves 
forced  to  raise  prices,  and  since  no  portion  of  society  is  troubling 
itself  even  to  try — let  alone  succeed — in  increasing  the  people's 
normal,  current  purchasing-power,  naturally  the  aggregate 
volume  of  production,  in  proportion  to  our  normal  productive 
capacity,  is  steadily  upon  the  wane.  For  this  there  is  no  remedy 
in  sight,  because  there  is  no  slightest  prospect  either  of  busi- 
nessmen voluntarily  and  generally  lowering  prices,  or  of  society's 
increasing  the  people's  purchasing-power,  in  any  normal,  per- 


PRODUCTION  61 

manent  and  stable  way.  In  the  face  of  such  a  situation  as 
that,  exhortation  to  produce  is  silly.1 

Our  National  Factory-system. — From  this  review  of  the 
basic  economic  principles  which  govern  the  broad  processes  of 
production,  we  must  turn  to  a  little  further  consideration  of  the 
mechanism  through  which  they  find  expression  in  our  daily 
life.  What  is  the  modern  factory-system,  as  a  national  in- 
stitution ? 

The  real  factory-system,  as  defined  by  the  above  broad  con- 
siderations, is  a  very  wide  and  inclusive  institution.  It  is 
virtually  co-extensive  with  modern  industry,  whether  associated 
with  what  is  commonly  known  as  a  factory  or  not.  A  railway, 
for  instance,  is  a  factory-system.  Its  raw  material  is  coal,  rails, 
cars,  etc.  These  it  grinds  up  into  a  finished  product  fit  for 
consumption  in  the  support  of  life,  namely,  transportation.  In 
this  same  sense  a  telephone-exchange,  a  city  street  or  sewer 
department,  or  a  university,  or  a  mission-board,  is  or  may  be  a 
factory-system. 

The  four  criterions  for  determining  whether  any  given  en- 
terprise forms  a  part  of  our  national  factory-system  or  not  are: 

(1)  Does  it  produce  something  which  supports  the  life  of  the 
Ultimate  Consumer, 

(2)  Do  its  members  work  without  owning  the  tools,  raw 
material  and  product  concerned? 

(3)  Do  they  each  work  in  undisturbed  monopoly  of  their 
jobs? 

(4)  Does  it  extend  credit,  in  the  form  of  loaned  appliances, 
to  its  members,  without  the  exaction  of  interest  thereon? 

The  World-factory. — Not  only  do  the  individual  workmen 
of  a  given  shop,  or  the  several-  shops  of  a  larger  factory,  co- 

i  Since  this  was  written  the  commercial  world,  chiefly  comprised  by 
this  country,  England,  France  and  Italy,  has  issued  for  the  purposes 
of  the  Great  War  some  two  hundred  billions  of  dollars'  worth  of  gov- 
ernmental loans.  The  bulk  of  this  enormous  sum  has  been  expended 
in  America.  It  is  the  expenditure  of  this  vast  fund,  by  those  for- 
tunate enough  to  have  shared  in  its  distribution,  which  explains  that 
lavish  disregard  of  prices  which  excites  comment  on  every  hand. 

But  it  must  not  be  forgotten  that  all  of  this  fund  is  fiat-money, 
printed  off  on  paper  against  the  assurance  that  patriotism  would  make 
it  good.  But  patriotism  is  a  thing  which  can  wane,  and  the  day  for 
paying  the  interest  upon  this  huge  loan — amounting  to  some  ten  bil- 
lions per  annum  in  addition  to  the  principal  of  the  debt — has  yet  to 
make  itself  felt.  (December,  1919.) 


62  MODERN   ECONOMIC   TENDENCIES 

operate  to  produce  what  supports  the  life  of  the  Ultimate  Con- 
sumer, under  the  factory-system,  but  all  the  separate  factories 
of  the  nation,  or  the  world,  must  be  regarded  as  component 
parts  of  a  unitary  factory-system,  in  so  far  as  they  interchange 
partly  finished  commodities  without  negotiation  over  price  or 
ownership.  Of  course,  as  a  matter  of  fact,  such  negotiation 
always  does  accompany  such  interchange,  when  between  factories 
which  are  separately  owned.  But  what  is  emphasized  here  is 
that  these  two  functions — the  interchange  of  materials,  on  the 
one  hand,  and  the  negotiation,  on  the  other — are  parallel, 
distinct,  and  not  necessarily  associated  functions. 

For  it  is  obvious  that  between  the  workmen  within  every 
shop,  and  between  the  shops  within  every  factory,  most  efficient 
interchange  of  commodities  is  now  proceeding  upon  an  enormous 
scale,  quite  without  negotiation.  It  is  also  a  common  phe- 
nomenon for  a  shop  which  had  previously  been  separate,  and 
so  conducting  its  interchange  only  after  negotiation,  to  enter 
a  consolidation;  and  after  that  the  same  men  interchange  the 
same  commodities,  even  more  actively,  yet  quite  without  negotia- 
tion. 

Therefore,  leaving  to  the  future  all  debate  as  to  ways  and 
means,  it  is  obvious  that  material  interchange,  on  the  one 
hand,  and  negotiation  as  to  ownership  or  price,  upon  the  other, 
are  distinct  and,  to  some  degree  yet  to  be  determined,  inde- 
pendent functions.  What  we  are  emphasizing  for  the  moment 
is  that  it  is  the  worldwide  co-ordination  of  material  inter- 
change,  whether  accompanied  by  negotiation  or  not,  which 
actually  constitutes  the  factory-system  which  supplies  us  with 
all  which  we  consume. 

In  the  above  broad  sense,  it  is  the  office  of  the  factory- 
system  to  extract  raw  materials  from  the  soil,  the  sea,  the  mine 
and  the  forest,  the  world  over,  and  to  subject  them,  without 
raising  question  as  to  ownership  or  price,  to  those  intricate 
processes  of  transformation,  aggregation,  transportation  and 
subdivision  which,  interwoven  in  an  inconceivable  complexity, 
result  in  placing  in  the  hands  of  the  Ultimate  Consumer  all 
those  things  and  services  which  he  consumes  in  the  support  of 
his  life.  This  classification  includes  everything  which  actually 
supports  or  elevates  life — instruction,  amusement  and  religious 
inspiration,  just  as  much  as  the  more  tangible  commodities — 


PKODUCTION  63 

wherever  their  existence  is  the  result  of  an  unbiased,  conscious 
demand  by  the  Ultimate  Consumer. 

Consumption. — Within  the  Ultimate  Consumer  these  supplies 
of  material  and  inspirational  life-support  lose  their  existence 
in  the  development  of  a  fresh  fund  of  human  energy.  But  now 
this  energy  is  biological  and  individual  in  character,  rather 
than  social  or  economic. 

This  individual  energy  is  then  destined  for  one  of  three  goals. 
It  is  either  re-invested  in  fresh  productive  effort,  which  pro- 
duces all,  or  more  than,  it  consumed.  Or  it  may  be  morally 
dissipated  in  wrong  individual  life.  Or  it  may,  quite  con- 
sistently with  moral  integrity  upon  the  individual's  part,  be 
dissipated  economically,  through  some  mistaken  idea  as  to  the 
effect  of  certain  sorts  of  social  activity.  It  is  this  last  sort  of 
dissipation  which  interests  us  in  this  present  investigation. 

Modern  Intricacy. — Both  of  these  productive  processes  men- 
tioned above — the  transformation  and  transportation  of  origi- 
nally raw  materials — which  were  simple  processes  in  the  ob- 
solete cottage-system,  have  now  become  incomprehensibly  in- 
tricate. No  mind  except  that  of  the  specialist  can  fathom 
the  complexities  of  the  transformative  processes  occurring 
within  even  a  single  line  of  production.  No  mind  can  grasp 
it  in  its  aggregate. 

Transportation  has  also  become  inconceivably  intricate.  The 
number  of  geographically  separated  steps  in  production  has 
multiplied  tremendously.  The  Ultimate  Consumers  of  the 
fruits  of  any  particular  factory-process  are  now  scattered 
throughout  the  hundred  million  people  of  this  nation,  or  the 
billion  Consumers  of  the  four  quarters  of  the  globe,  as  needles 
in  a  hay-stack.  The  aggregate  amount,  and  the  number  of 
different  steps,  of  transportation  requisite  for  reaching  them 
is  quite  beyond  human  comprehension.  We  may  state  it  in 
figures,  as  we  do  the  distances  of  the  stars,  but  we  cannot  un- 
derstand it. 

Specialization  and  Interchange. — This  modern  intricacy  of 
industry  cannot  be  understood  without  a  further  word  as  to  the 
visible  aspect  of  the  modern  factory,  aside  from  its  peculiarities 
of  organization.  First  in  these  aspects  comes  the  feature  of 
factory-interchange,  and  secondly  factory-credit. 

The  modern  factory,  it  apparently  needs  to  be  pointed  out,  is 
a  field  of  the  most  constant  and  active  interchange  of  com- 


64  MODERN  ECONOMIC  TENDENCIES 

modifies  and  services  between  individuals,  each  of  whom  special- 
izes upon  some  small  detail  of  the  ultimate  product.  In  the 
wonderful  efficiency  of  the  final  results  of  the  modern  factory- 
system,  individual  "production/'  in  the  sense  of  what  the  work- 
man does  by  himself  at  bench  or  machine,  is  quite  a  minor 
factor  in  its  true  production,  namely,  the  finished  output  ready 
to  be  sent  into  the  world.  For  this  last  depends  primarily 
upon  the  maintenance,  first,  of  the  one  condition  requisite  for 
efficient  production — extreme  specialization — and  secondly,  of 
the  factory's  most  important  active  function — constant,  rapid, 
easy  interchange  of  materials  and  services,  as  the  handmaiden 
thereto. 

Specialization,  of  itself,  has  been  known  in  industry  ever 
since  the  feudal  system  collapsed,  if  not  before.  Men  have 
always  been  specialized  as  carpenters,  bakers,  armorers,  etc. 
But  these  specialized  trades,  in  the  old  cottage-system,  did  not 
interchange.  They  sold  direct  to  the  Ultimate  Consumer.  In 
the  factory-system,  on  the  other  hand,  these  trades  interchange 
their  output  with  each  other,  without  sale  or  purchase. 

Factory  Co-ordination. — Thus  in  all  factories  of  modern 
dimensions  there  exists  a  whole  array  of  different  shops — 
machine-shop,  pattern-shop,  foundry,  tool-room,  carpenter- 
shop,  paint-shop,  drafting-room,  etc. — all  united  and  co-ordi- 
nated into  a  whole  by  the  Central  Office;  and  between  these 
several  departments,  as  well  as  between  the  individuals  within 
each  department,  occurs  this  continuous  interchange  of  com- 
modities and  service  which  constitutes  the  life-blood  of  the 
factory.  Every  effort  of  the  designer  of  the  factory  and  of  its 
superintendent,  aided  now  by  specialized  "efficiency-engineers," 
is  devoted  to  shaping  this  circulatory  system  so  that  it  shall 
absorb  the  least  time  and  effort,  and  shall  be  the  least  liable 
to  interruption  or  derangement  by  the  ordinary  events  of  life. 

In  the  most  modern  development  of  the  factory  this  circula- 
tory interchange  is  so  rapid  and  constant  that  often  the  partly 
finished  work  is  not  even  allowed  to  stop  while  any  one  work- 
man performs  his  function  upon  it.  In  many  factories  the 
material  is  not  touched  by  human  hands  during  its  progress 
through  long  series  of  steps  in  manufacture.  Raw  material 
enters  at  one  end  of  the  factory  and  comes  out  finished  at  the 
other — sheared  into  blanks,  stamped  into  forms,  drilled,  turned, 
punched,  threaded,  spun,  moved  from  building  to  building, 


PRODUCTION  65 

baked,  polished,  painted,  counted  and  packed  in  boxes  in  the 
meantime — all  without  human  touch.  The  tools  which  do  all 
these  things  usually  move  with  the  material  while  at  work  upon 
it,  in  order  not  to  stop  and  delay  the  latter. 

In  factories  where  machines  have  to  be  assembled,  as  in  the 
manufacture  of  automobiles,  for  instance,  this  circulatory  proc- 
ess becomes  even  more  striking.  An  endless  chain,  moving 
slowly  along  a  wide,  low  bench,  drags  along,  at  first,  only  the 
first  elements  of  a  frame.  As  this  passes  workman  after  work- 
man, each  assigned  to  perform  some  single  task,  he  steps  for- 
ward and  does  it — adds  a  brace  or  a  bolt  or  a  rivet,  or  attaches 
a  wheel — until  soon  the  chassis  is  rolling  upon  its  own  wheels. 

Then  slides  down  from  overhead  a  tonneau  which  had  been 
manufactured  upon  the  same  plan  on  the  floor  above,  and  the 
assembly  begins  to  look  like  a  car.  Before  it  has  reached  the 
end  of  the  building  every  detail  and  accessory  has  been  con- 
tributed, the  tanks  have  been  filled  with  water,  gasoline  and 
oil,  an  inspector  steps  aboard,  and  the  completed  car  rolls 
away  from  the  end  of  the  chain  under  its  own  power! 

It  is  uncanny !  The  observer  cannot  long  stand  and  watch 
these  automatic  machines,  tossing  out  finished  articles  by  the 
hundred  or  thousand  per  minute,  or  rolling  cloth  or  photogra- 
phic films  into  bolts  continuously,  night  and  day,  by  the  mile 
—with  floor  after  floor  and  building  after  building  filled  with 
such  machines — that  he  is  not  forced  to  ponder  where  can  be 
found  the  population  to  consume  all  that  output.  Yet  the 
economic  problem  of  the  day  is  not  to  consume  what  we  pro- 
duce, but  actually  to  expand  our  rate  of  production  to  meet 
our  needs ! 

There  is  absolutely  no  limit  to  human  demand.  Purchasing- 
power,  it  is  true,  is  often  narrowly  limited.  It  is  commonly 
exceeded  by  supply,  developing  what  is  carelessly  called  "over- 
production." But  of  real  overproduction,  in  excess  of  true 
human  demand,  there  has  never  been  any  evidence  of  a  particle. 

Factory-credit. — There  is  another  feature  of  the  factory- 
system  the  importance  of  which  must  not  be  inferred  from  its 
being  mentioned  last.  This  is  its  universal  extension  of  credit 
to  individual  workmen,  in  material  form — the  arrangement 
whereby  a  costly  machine-tool,  or  a  railway-train,  or  a  palatial 
steamship,  or  a  hospital  full  of  invaluable  lives,  is  entrusted 
to  a  craftsman  competent  to  handle  it,  who  is  given  full 


66  MODERN    ECONOMIC   TENDENCIES 

autonomy  in  its  control  and  use,  for  the  good  of  the  entire 
factory  or  community. 

The  use  of  the  word  credit  in  this  connection  is  unusual, 
because  of  our  habitual  reservation  of  the  word  to  indicate 
commercial  credit — a  special  form  of  credit  in  general — a  loan 
executed  between  individuals  for  the  purpose  of  enabling  one 
or  both  of  them  to  acquire  pecuniary  profit.  Yet  it  is  one 
of  the  major  lessons  to  be  instilled  by  this  book  that  this 
special  reservation  of  the  word  credit  is  misleading.  It  is  mis- 
leading because  the  fact  will  develop,  as  we  proceed,  that  the 
only  really  useful  function  of  the  commercial  loan  or  credit 
lies  not  in  what  pecuniary  reward  it  may  bring  to  either  of 
the  contracting  individuals,  but  solely  in  the  fluidity  which  it 
contributes  to  the  productive  processes  of  the  land,  by  enabling 
costly  appliances  to  be  placed  more  freely  in  the  hands  of 
those  competent  to  use  them  productively,  whereby  the  Ultimate 
Consumers  are  the  better  supplied  with  life-support. 

But  because  of  this  widespread  misapprehension  it  must  be 
emphasized  here  that  the  sole  value  resultant  to  society  from 
the  assignment  of  a  railway-train,  for  instance,  to  its  driver, 
is  quite  the  same  as  that  resultant  from  a  commercial  loan — 
in  so  far  as  the  latter  may  aid  the  former  process — in  either  case, 
the  carriage  of  freight  or  passengers.  That  is  to  say,  the  factory- 
loan  is  the  pure,  natural  and  only  useful  credit- function.  The 
commercial  loan  may  or  may  not  aid  this  sole  true  credit- 
function — the  facilitation  of  life-support  for  the  Ultimate 
Consumer. 

Thereby  pivots  criterion  as  to  the  social  value  of  the  com- 
mercial loan.  For  only  in  so  far  as  commercial  loans  may  be 
found  to  aid  the  fluidity  or  volume  of  factory-assignments  of 
appliances  to  workmen,  may  they  be  regarded  as  socially  help- 
ful. In  so  far  as  they  may  be  found  to  hinder  the  true  credit- 
function — factory-loans — they  must  be  condemned,  as  an  in- 
stitution deterrent  or  destructive  of  production. 

In  other  words,  the  factory-system,  besides  being  all  which 
has  already  been  described,  is  a  gigantic  arrangement  for  the 
extension  of  loans  or  credit  to  producers.  All  the  superficial 
appearances  of  its  method  of  doing  this,  it  is  true,  are  con- 
trasted diametrically  with  those  surrounding  the  commercial 
loan.  Yet  the  productive  aspects  of  the  two,  so  far  as  they 
have  anything  in  common,  are  the  same. 


PRODUCTION  67 

In  this  the  factory,  indeed,  is  a  far  greater  machine  for  the 
extension  of  credit  than  is  the  bank,  because  of  the  number 
of  its  assignments.  It  loans  to  millions  where  the  bank  loans 
to  thousands.  Nor  are  its  loans  insignificant  in  amount  per 
loan.  For  when,  for  instance,  a  seacaptain  navigates  to  sea 
a  liner  worth  several  millions  of  dollars,  which  has  been  en- 
trusted to  his  command,  he  has  in  reality  contracted  (for  the 
good  of  society)  such  a  loan  as  no  bank  would  ever  have 
granted  him,  in  the  form  of  money  or  commercial  credit,  had 
he  lived  next  door  to  it  all  his  honest,  able  life. 

Factory  and  Commercial  Credits.— Society  thus  relies,  for  its 
economic  circulating-medium,  upon  two  contrasted  forms  of 
credit-instrument.  These  two  forms  of  paper  instrument  are 
alike  in  that,  in  each  case,  their  sole  useful  function  is  the 
facilitation  of  the  actual  circulation  of  physical  commodities 
or  useful  services  between  man  and  man.  But  in  every  other 
respect,  they  are  diametrically  contrasted  both  in  form  and  in 
economic  effect.  These  two  forms  are  known,  respectively,  as 
factory-credit  and  commercial  credit. 

The  paper  instruments  currently  relied  upon  in  the  factory- 
system  for  carrying  out  this  policy  of  loaning  appliances  or 
commodities  to  individuals  for  productive  purposes  are  called 
requisitions  or  shop-orders.  They  never  bear  interest.  They 
are  never  personally  owned.  Yet  they  illustrate  in  maximum, 
100-per-cent  purity  and  efficiency  the  only  beneficial  function 
attaching  to  any  credit-instruments  whatever,  namely,  the 
facilitation  of  the  circulation  of  commodities  between  man  and 
man,  as  an  aid  to  production,  interchange,  specialization  and 
distribution,  and  hence  to  life-supporting  consumption. 

The  paper  instruments  currently  relied  upon  outside  the 
factory-system  for  promoting  or  permitting  the  circulation  of 
economic  energy  are  called,  on  the  other  hand,  interest-bearing 
securities.  While  they  appear  in  most  diverse  form,  bearing 
many  different  names,  yet  they  all  fall  under  this  broad  title. 
They  are  all  alike  in  these  following  peculiarities,  namely: 
(1)  They  always  bear  interest.  (2)  They  are  always  personally 
owned. 

The  Prime  Function  of  Commercial  Credit — Pecuniary 
Gain. — Indirectly  and  incidentally  these  securities,  by  their  nego- 
tiable fluidity,  do  aid  the  actual  circulation  of  commodities  and 
service.  But  since  this  latter  phenomenon  is  confined  to  the 


68  MODERN   ECONOMIC   TENDENCIES 

factory-system,  from  which  commercial  credits  are  rigorously 
debarred — because  the  factory  has  its  own  credit-system — these 
interest-bearing  commercial  credits  are  obliged  to  effect  this 
aid  through  an  indirect  influence,  exerted  within  a  field  distinct 
from  the  factory-system.  This  external  field  will  be  considered 
later. 

Moreover,  the  influence  of  these  commercial  credits  over  the 
circulation  or  interchange  of  actual  commodities  is  not  merely 
indirect.  It  is  so  secondary  and  incidental  that  it  is  often 
difficult  to  ascertain  whether  it  be  positive  or  negative.  For  the 
prime  purpose  in  mind  in  the  issue  of  commercial  credits  is 
not  to  free  some  appliance  for  use,  however  vehement  may 
be  the  asseverations  that  it  is  so,  but  to  bring  its  owner  a  divi- 
dend, rent,  interest-payment  or  similar  pecuniary  gain. 

The  truth  of  this  statement  need  not  rely,  for  proof,  upon 
any  observation  of  result,  for  that  is  physically  impossible; 
nor  upon  proof  of  the  motives  of  the  issuer,  which  is  psycho- 
logically impossible.  It  rests,  instead,  upon  the  universally 
unquestioned  fact  that  the  valuation-  of  these  commercial  credit- 
instruments  in  exchange,  and  hence  their  useful  fluidity,  depends 
solely  upon  this  pecuniary  return.  If  they  fail  in  it  no  one 
will  consent  to  buy,  own  or  use  them,  however  dire  may  be  the 
people's  need  for  the  appliance  which  they  control. 

Hence  this  must  be  their  prime  function.  Whatever  aid  they 
may  happen  to  lend  to  the  actual  circulation  of  life-supporting 
commodities  must  be  secondary  and  incidental  to  this,  their 
prime  function — pecuniary  gain.  We  shall  see  later  that  this 
secondary  function  can  be  performed  only  to  the  degree  which 
proves  to  be  compatible  with  a  maximum  performance  of  the 
prime  function — private  profit. 

Credit  and  Interchange. — So  important  is  the  natural  func- 
tion of  any  circulatory  system  of  paper  credit-instruments  in 
the  life-supporting  processes  of  a  community,  wherein  they 
make  possible  that  parallel  circulation  of  materials  and  services 
which  are  vital  to  the  life  of  the  economic  body,  that  the  next 
chapter  will  be  devoted  exclusively  to  the  topic  of  Credit.  In 
the  meantime  it  is  important  to  emphasize  the  broad  fact  that 
this  interchange  of  materials  and  services,  which  is  as  vital  an 
economic  function  as  is  bare  manufacture  itself,  is  one  of  the 
most  prominent  functions  of  the  national  factory-system.  In- 


PRODUCTION  69 

deed,  in  modern  life  it  is  by  far  the  most  vital  portion  of 
production. 

The  factory-system  performs  this  circulatory  function  far 
more  actively  than  any  market  does,  in  spite  of  the  common 
regard  of  the  latter  as  the  sole  habitat  of  interchange;  for  the 
market  bargains  much  and  trades  little,  whereas  the  factory 
trades  all  the  time,  and  never  wastes  any  time  or  effort  in  bar- 
gaining at  all.  This  fact  is  made  possible  by  the  fact  that  the 
factory-system  continually  extends  credit  upon  an  enormous 
scale,  probably  far  surpassing  the  banks  in  aggregate,  and  that 
ownership-in-industry  is  religiously  excluded  from  its  borders. 

The  Personnel  of  the  Factory-system. — This  great  co-op- 
erative, monopolistic,  non-owning,  free-credit,  national  (or 
world)  factory-system  method  of  industry  now  enrolls,  it  is 
to  be  noted,  a  major  portion  of  our  active  population  within 
its  ranks.  More  than  nine-tenths  of  all  our  people  now  actually 
work,  live  and  die — and  have  done  so  for  a  generation  or  two 
— under  a  system  from  which  was  eliminated  at  the  start  all 
hope  or  promise  of  their  ever  owning  aught  beside  that  which 
they  may  purchase  outside  the  factory  for  Ultimate  Consump- 
tion; one  from  which  all  competition  for  the  securing  of  work 
has  been  rigidly  excluded;  one  in  which  the  use  of  costly  ap- 
pliances is  continually  being  allotted  to  propertyless  men,  with- 
out the  exaction  of  interest;  and  one  in  which  interchange  of 
materials  and  service,  under  the  guidance  of  a  Central  Office, 
is  everywhere  and  at  all  times  most  active,  yet  without  the 
slightest  accompanying  negotiation  as  to  price  or  ownership. 

Yet  this  great  and  most  efficient  propertyless  system — so 
diametrically  opposed  to  that  idea  of  license  to  own  anything 
in  sight,  and  of  sacredness  of  everything  against  use  except 
through  ownership  (or  upon  payment  of  interest  thereon), 
which  has  come  to  be  misunderstood  as  the  essence  of  property- 
rights — was  first  inaugurated,  has  been  steadfastly  maintained, 
and  is  being  sedulously  extended,  not  by  the  radical  element 
of  society,  but  by  that  very  employer-capitalist  portion  of  society 
which  is  daily  asserting  most  vociferously  the  sacredness  of  the 
institution  of  property. 

There  is  some  deep-seated  confusion  of  mind  here  which 
must  be  clarified,  before  any  of  the  economic  issues  of  the  day 
may  be  understood.  To  those  who  regard  all  propositions  look- 
ing toward  any  restriction  of  the  license  to  own  property-in- 


70  MODERN   ECONOMIC  TENDENCIES 

industry  as  revolutionary,  or  anarchistic,  or  as  originating  only 
with  irresponsible,  unpatriotic  agitators,  this  historical  aspect 
of  the  modern  factory-system,  originated  and  controlled  by 
the  capitalist-employer  class,  calls  for  most  careful  considera- 
tion and  courageous  avowal. 


CHAPTEE  V 

CREDIT 

Catalysis. — Credit  is  the  great  economic  catalyst.  Even  in 
physics  or  chemistry  catalysis  has  not  been  explained  in  detail, 
although  continually  being  relied  upon  in  greater  measure  for 
results.  But  in  economics  we  can  follow  its  action  somewhat 
further  in  detail,  aided  by  the  following  simile  quoted  from 
some  unknown  wit. 

In  marital  affairs  no  new  family  can  be  inaugurated  without 
the  consumption  of  a  bride  and  a  groom  for  each  family.  The 
creation  of  an  hundred  families  requires  the  supply  of  an  hun- 
dred brides  and  an  hundred  grooms;  and  none  of  these  may  be 
used  over  again — at  least,  without  detriment. 

Similarly,  no  new  family  can  be  inaugurated  without  the 
presence  and  activity  of  a  minister,  or  equivalent.  His  func- 
tion is  indispensable. 

Yet  here  the  parallel  between  principals  and  minister  ends; 
for  the  development  of  an  hundred  weddings,  uniting  an  hun- 
dred brides  with  an  hundred  grooms,  still  calls  for  only  one 
minister,  and  at  the  end  this  minister  has  not  been  consumed, 
nor  even  depreciated.  Given  reasonable  time,  he  can  continue 
indefinitely  to  unite  couples  into  indissoluble  wedlock. 

In  this  the  minister  is  a  marital  catalyst.  For  a  catalyst, 
in  physical  or  chemical  action,  is  a  substance  which  by  its 
presence  makes  possible  some  interaction  between  other  sub- 
stances or  energies,  yet  without  itself  taking  any  part  in  the 
phenomenon,  in  the  sense  of  being  consumed  or  impaired. 

In  electrical  engineering,  for  instance,  magnetism  is  the 
catalyst.  Steam  or  water-power  cannot  be  converted  into  electric 
current  without  the  aid  of  magnetism.  Yet  the  magnetism  is 
not  consumed  in  the  process. 

Economic  Catalysis. — Credit  is  the  great  economic  catalyst. 
Credit,  in  its  broadest  sense,  is  a  simultaneous,  social  attitude 
of  mind  expressed  in  economic  form — an  abstract  belief  on  the 

71 


72  MODERN   ECONOMIC   TENDENCIES 

part  of  the  community  in  the  usefulness  of  certain  tokens,  as 
instruments  for  enabling  social  co-operation  in  search  of  future 
returns  to  be  had  through  the  use  of  these  tokens.  Yet  the 
tokens  themselves  are  not  consumed  nor  impaired  by  this  use. 
Still  less  is  the  public  sentiment  which  gives  them  value. 

Thus,  imagine  twenty-  men,  each  of  whom  stands  ready  to 
purchase  one  dollar's  worth  of  goods  or  service  from  some  one 
of  the  others — each  having  confidence  in  the  value  to  him  of 
the  goods  or  services  desired,  and  in  his  ability  to  develop,  with 
their  aid,  an  equivalent  amount  of  life-support  in  return. 
Imagine  these  men  as  standing  in  a  circle,  each  man  next  to 
his  would-be  creditor.  The  aggregate  mutual  indebtedness  of 
the  little  community  is  then,  or  it  might  be,  twenty  dollars. 
The  actual  circulation  of  economic  life-blood — interchange  of 
commodities  or  service — might  be  twenty  dollars. 

But  if  no  one  among  the  twenty  happened  to  possess  a  dol- 
lar's worth  of  gold,  nor  any  other  substance  the  value  of  which 
was  agreed  upon  by  all,  making  it  universally  acceptable  as 
a  means  for  payment,  then  trade  is  impossible.  All  are  para- 
lyzed socially  and  economically,  although  each  is  well  able 
physically  to  serve  or  supply. 

In  that  case  each  must  remain  content  with  his  own  peculiar 
individual  productivity.  Yet  this,  we  know  from  practical  con- 
siderations, is  real  starvation  to-day,  in  comparison  with  what 
may  be  enjoyed  through  co-operation  in  exchange. 

Barter. — As  to  barter,  that  may  be  excluded  from  the  simile, 
because  barter  is  also  impracticable  in  any  modern  community, 
and  would  be  impracticable  in  the  illustrative  community  of 
twenty  if  it  had  not  been  supposed  that  all  were  equally  in- 
debted simultaneously,  to  the  amount  of  one  dollar  each. 

The  Monetary  Standard. — Nor  need  the  argument  be  diverted 
here  into  any  debate  of  the  essentials  of  a  money-basis,  whether 
gold,  bimetallism,  multi-standard  or  what.  It  need  merely  be 
explained  that  gold  is  now  the  accepted  world-basis  for  money. 

Earlier  panics  and  hard  times  for  the  people,  it  is  true,  were 
due  largely  to  defects  in  our  currency  and  banking  systems. 
They  were  distinctly  currency-panics,  characterized  by  wide- 
spread bank-failures  and  the  elevation  of  gold  to  a  premium. 

But  now  this  has  virtually  ceased  to  be  true.  The  panic  of 
1907  involved  hardly  one- tenth  the  bank-failures  of  that  of 
1873,  in  spite  of  the  larger  number  of  banks,  and  was  accom- 


CREDIT  73 

panied  by  scarcely  any  appreciable  disturbance  of  money-values. 
The  adoption  of  the  gold-standard  between  those  two  panics,  and 
of  the  federal  reserve  banking-system  since  the  last,  has  virtually 
removed  the  bank  and  the  currency  from  the  list  of  sources  of 
economic  danger — except  in  so  far  as  the  banks  still  constitute 
one  section  of  active  and  passive  commercialism,  in  the  same 
sense  that  a  corner-grocer  or  a  manufacturer  may  also  be  one, 
in  the  way  defined  and  condemned  herein. 

It  is  for  all  these  reasons  that  the  institution  of  credit  will 
be  analyzed  here  without  entrance  into  debate  as  to  the  exact 
nature  or  the  minor  imperfections  of  the  gold-basis  and  the 
present  banking-system.  Whatever  these  may  be,  the  imper- 
fections of  our  credit-system  are  far  greater. 

Credit-instruments. — Let  it  now  be  imagined  that,  in  our 
community  of  twenty  men,  one  man  did  possess  a  single  dollar's 
worth  of  gold.  Then  immediately  the  twenty  dollars'  worth 
of  debts  can  be  paid  by  means  of  this  one  lump  of  gold,  which 
is  passed  from  man  to  man  as  rapidly  as  possible,  being  equally 
acceptable  to  all. 

Or,  to  introduce  paper-currency,  the  gold  may  be  supposedly 
placed  in  the  custody  of  one  man,  who  issues  a  slip  of  paper 
which  he  agrees  to  accept  in  exchange  for  the  lump  of  gold, 
whenever  it  may  be  presented.  The  exchanges  may  then  be 
transacted  with  increased  facility,  due  to  the  superior  conveni- 
ence and  cheapness  of  the  paper ;  and  the  paper  may  be  renewed, 
when  worn  or  soiled,  with  a  thousandth  part  of  the  cost  -of 
replacing  the  gold  itself. 

The  Function  of  Credit. — Thus,  by  the  simple  fact  of  public 
agreement  upon  and  faith  in  the  gold  as  a  circulating  medium, 
the  all-important  factor  of  an  economic  catalyst — credit — has 
been  added  to  the  community.  The  twenty  men  previously 
paralyzed  industrially  have  thereby  been  galvanized  into  eco- 
nomic activity,  usefulness  to  each  other,  and  individual  happi- 
ness. All  this  has  been  accomplished,  to  the  extent  of  twenty 
dollars'  worth  of  interchange  each  time  that  the  dollar  can  be 
passed  around  the  circle,  by  a  single  dollar's  worth  of  gold — 
or  perhaps  by  a  mere  slip  of  paper  which  all  believe  to  be 
exchangeable  for  gold. 

Yet,  in  the  accuracy  of  thought  of  a  scientific  analysis,  it 
must  be  remembered  that  the  gold  is  just  as  much  a  credit- 
instrument  as  is  the  paper  slip  issued  against  it.  For  the 


74  MODERN   ECONOMIC   TENDENCIES 

gold,  of  itself,  cannot  support  life.  It  is  merely  as  an  accepted 
symbol  of  the  belief  or  credit,  on  the  part  of  each  man  that 
his  neighbors  are  capable  of  serving  him  usefully,  that  the  gold 
has  value. 

But  the  same  is  true  of  the  paper.  Both  gold  and  paper  are 
merely  credit-symbols.  It  is  only  as  an  unfortunate  convention 
or  tradition  that  we  have  styled  the  paper  a  "credit-instru- 
ment," in  supposed  contrast  with  gold,  which  latter  is  regarded 
as  having  some  sacred  value  inherent  in  itself. 

Stability  of  Credit. — It  may  next  be  supposed  that  the  com- 
munity of  twenty  observes  that,  since  there  is  little  likelihood 
of  everyone's  wishing  to  exchange  paper  for  gold  at  the  same 
time,  more  than  one  slip  of  paper  may  be  issued  against  the 
single  lump  of  gold  without  harm.  The  labor-cost  embodied 
in  the  gold  then  determines  the  valuation  of  each  slip  of  paper ; 
and  this  valuation  it  usually  retains,  in  spite  of  the  fact  that 
everyone  knows  that  if  all  demanded  gold  at  once  only  one 
could  be  satisfied.  Occasionally,  however,  this  faith  collapses, 
and  then  there  occurs  a  currency-panic,  with  gold  soaring  to  a 
premium. 

Thus  the  relative  quantities  of  gold  and  paper  affect  the 
stability  of  the  latter,  but  not  the  price  of  either.  When  paper- 
money  depreciates  in  valuation,  through  its  issuance  in  too  great 
quantity,  it  is  not  as  a  commodity-value  that  it  depreciates, 
from  mere  plentif ulness ;  but  solely  because  public  faith  in  the 
chances  of  its  not  being  presented  for  gold,  beyond  the  quantity 
of  gold  available,  wanes  as  the  volume  of  paper-money  increases. 

A  plentiful  commodity — including  gold  as  such — depreciates 
because  of  its  ease  of  production  or  acquisition.  A  too  plentiful 
token-currency  depreciates  because  of  the  growing  chances  that 
it  may  prove  not  to  be  money  at  all.  The  first  is  a  symptom 
of  labor.  The  latter  is  one  of  credit,  or  belief. 

Thus  the  limits  in  proportion  of  paper  to  gold  which  must 
be  observed,  in  order  to  maintain  a  reasonable  stability  against 
currency-panic,  obviously  depend  upon  the  general  peace  and 
stability  of  the  economic  world.  Faith  in  the  currency  depends, 
both  positively  and  negatively,  upon  a  general  atmosphere  of 
faith  in  other  things  economic. 

Until  men  learned  to  be  wise  and  conservative  in  guaging  this 
danger  of  collapse,  which  they  have  now  apparently  succeeded 
in  doing,  general  economic  stability  depended  largely  upon 


CREDIT  75 

stability,  of  the  currency.  Commercial  panic  ensued  only  after 
currency-panic  had  developed. 

Now  that  our  currency  has  been  thoroughly  stabilized,  general 
economic  stability  has  been  freed  from  menace  in  that  direction. 
But  it  has  simultaneously  incurred  threat  from  quite  another 
factor,  namely,  the  decreasing  purchasing-power  of  the  dollar. 
That  factor  has  long  been  at  work  obscurely,  it  is  true ;  but  now 
for  the  first  time  it  is  left  bare  and  alone,  to  work  its  will  upon 
the  situation,  without  regard  to  the  strength  or  weakness  of  the 
currency. 

The  Dual  Nature  of  Credit.— To  return  to  the  illustrative 
community  of  twenty,  under  the  more  advanced  plan  of  issuing 
more  than  one  slip  of  paper  against  the  one  dollar  of  gold, 
there  may  be  twenty  such  slips,  it  may  be  supposed.  Each 
man  may  then  possess  one  paper  dollar.  To  that  extent  he 
commands  real  wealth,  although  he  owns  no  gold,  nor  anything 
else  useful  in  the  arts  of  life-support  except  his  hands  and 
faculties;  although,  too,  his  slip  of  paper  may  conceivably  re- 
sume its  trifling  value  as  such  at  any  time,  if  conditions  be 
too  violently  disturbed. 

Yet  each  man  in  reality  cares  little  or  nothing  about  the  gold 
itself.  What  he  desires  are  the  services  of  his  neighbors,  for 
which  he  is  anxious  to  exchange  his  own.  Yet  this  he  cannot 
do  unless  all  agree,  first,  upon  some  one  thing,  such  as  gold, 
which  will  always  be  acceptable — merely  because  it  is  fairly 
uniform  in  cost  of  production,  not  subject  to  corrosion  or  decay, 
subdivisible  or  aggregable  without  deterioration,  compact  per 
unit  of  value,  and  useful  to  a  slight  degree  in  the  arts. 

Secondly,  all  must  agree  upon  the  issue  of  certain  slips  of 
paper  in  representation  of  this  gold,  the  amount  of  such  paper- 
currency  being  in  excess  of  the  gold,  yet  with  proper  safe- 
guards against  abuse.  The  gold  then  contributes  value  to  the 
paper;  the  paper  contributes  fluidity  to  the  gold.  But  neither 
of  them  possesses  any  appreciable  value  to  the  community, 
except  in  so  far  as  the  community  contributes  that  value  by 
its  entertainment  of  a  sentiment  of  simultaneous  faith  in  each 
other.  This  faith  is  called  intangible  economic  credit. 

Economic  credit,  therefore,  plainly  consists  of  two  factors. 
The  primary  of  these  two  factors  is  the  intangible  sentiment 
of  faith  felt  by  the  average  citizen,  partly  in  the  individual 
character  of  his  fellows,  but  most  of  all  in  the  general  social 


76  MODERN   ECONOMIC   TENDENCIES 

conditions  of  the  moment,  which  unite  them  all  in  relationships 
which  may  be  good  or  bad  quite  independently  of  such  qualities 
within  each  individual.  The  secondary  factor  in  economic 
credit  is  the  tangible  instrument,  or  system  of  instruments, 
relied  upon  to  give  public  expression  to  the  intangible  senti- 
ment. 

In  such  a  dual  system  as  that,  failure  may  occur  from  defects 
either  in  the  intangible  sentiment  or  in  the  tangible  instrument. 
In  the  earlier  history  of  our  land  periodic  collapses  of  credit 
and  economic  interchange  were  plainly  due  to  glaring  faults 
in  the  tangible  instruments  of  credit,  begetting  consequent 
lapses  in  the  intangible  sentiment.  But  now,  in  so  far  as  con- 
cerns merely  the  currency,  and  the  banks  in  their  function  of 
reservoirs  thereof,  this  trouble  is  apparently  past. 

On  the  other  hand,  if  history  is  to  repeat  itself  in  the  near 
future,  in  any  such  a  collapse  of  intangible  confidence  through 
a  fault  in  the  mechanical  instruments  now  relied  upon  for  its 
expression,  it  must  be  due  to  defects  in  the  instrument  which 
modern  finance  has  substituted  for  the  currency  of  earlier  days, 
while  it  was  reforming  the  latter.  For  we  now  no  longer  rely, 
to  any  appreciable  degree,  upon  the  circulating  instruments  of 
credit  which  only  a  generation  ago  were  still  prominent  as  such, 
and  which  two  generations  ago  formed  virtually  our  sole  medium 
for  interchange,  namely,  bank-notes  and  currency. 

Interest-bearing  Securities. — Instead,  our  present  reliance  is 
almost  wholly  upon  privately  issued,  interest-bearing  securities. 
Although  these  were  nominally  present  in  the  financial  system 
of  1850,  and  although  currency  still  forms  a  part  of  it  to-day, 
yet  during  the  interim  the  relative  proportions  of  these  two 
have  been  completely  reversed.  In  1850  bank-notes  and  other 
currency  formed  the  mainstay  of  commerce,  with  securities 
obscurely  in  the  back-ground ;  and  at  that  time  it  was  the  defects 
in  our  system  of  state  and  other  banks,  with  their  over-issue 
of  notes,  which  alone  threatened  economic  stability. 

But  to-day  interest-bearing  securities  are  relied  upon  as  the 
major  portion  of  our  circulating-medium,  to  a  proportion  ex- 
ceeding currency  certainly  by  a  tenfold,  and  perhaps  by  a 
twenty-fold  ratio.  It  is  they,  and  not  our  currency,  which 
we  must  fear. 

Mr.  William  Ingle,  chairman  of  the  recently  created  Federal 


CREDIT  77 

Keserve  Board,  in  an  article  upon  "Credit  Reform"  contributed 
in  1916  to  the  American  Academy  of  Political  Science,  says: 

"In  the  presence  of  conditions  in  this  country  approxi- 
mating normal,  money  or  currency  cares  for  just  about  four 
per  cent  of  the  average  daily  amount  of  its  business.  Credit, 
in  open  account  or  credit-instruments  such  as  checks,  notes 
or  bills  of  exchange,  liquidates  the  remainder,  either  im- 
mediately or  at  some  future  date.  Seriously  disturb  this  usual 
relation  and  for  any  reason  impose  upon  business  a  settlement 
in  cash  of  ten  per  cent  of  its  volume,  and  we  have  panic,  whether 
severe  or  mild  being  dependent  upon  conditions  developed 
from  the  use,  or  more  properly  the  abuse,  of  credit/' 

Yet  in  the  list  of  credit-instruments  given  by  Mr.  Ingle 
he  makes  no  mention  of  stocks,  bonds,  mortgages,  insurance- 
policies,  warehouse-receipts,  etc,  which  constitute  the  chief  basis 
for  the  circulation  of  credit  in  the  financial  district.  This  is 
probably  because  he  had  in  mind  only  retail  transactions,  a 
class  which  employs  these  latter  forms  of  credit-instrument  to 
an  inappreciable  degree. 

But  in  the  downtown  business  of  financing  the  expansion  of 
the  larger  corporate  activities,  stocks  and  bonds,  etc.,  constitute 
virtually  the  sole  reliance  for  fluidity.  Probably  no  one  can 
say  positively  what  is  the  exact  ratio  to-day  of  credit-instru- 
ments to  currency  in  the  business-world,  but  it  is  safe  to  assert 
that  it  cannot  be  less  than  twenty  or  thirty  to  one.  It  may 
easily  be  fifty  to  one. 

As  this  fact  has  gradually  come  into  being,  the  function  of 
the  banks  has  been  correspondingly  transformed,  from  their 
pristine  concern  merely  in  the  maintenance  of  a  reservoir  of 
currency,  with  means  for  financial  exchange  with  distant  points, 
into  one  concerned  primarily  in  the  making  of  loans,  discounts, 
sales  or  purchases  of  interest-bearing  securities,  notes,  etc.  The 
banks  have  now  become  distinctly  dealers  or  merchants  in  credit, 
making  their  profits  from  its  supply  to  the  public  quite  as  a 
grocer  does  with  sugar.  The  subservience  of  the  people  to  the 
banking-system  now  rests  scarcely  at  all  upon  the  latter's  control 
of  our  stock  of  gold,  of  which  we  now  make  little  use,  but  upon 
its  monopoly  of  our  stock  of  fluid  credit,  upon  which  the  very 
life  of  industry  is  increasingly  coming  to  depend. 

While  it  is  true  that  the  banks  have  always  dealt  in  credit, 


78  MODERN   ECONOMIC   TENDENCIES 

to  a  degree — and  to  that  broad  fact  can  be  attributed  their 
every  past  failure — yet  the  manner  of  their  doing  so,  and  the 
instruments  created  for  the  execution  of  that  policy,  have  been 
basically  transformed.  Thus  the  banking-system  has  recently 
incurred,  during  the  very  period  of  its  reform  from  the  cur- 
rency-follies of  its  youth,  this  new  and  greater  need  of  reform, 
inherited  gradually  and  subconsciously  from  its  self-indulgence 
in  the  merchandising  of  credit  in  modern  form,  however  con- 
servatively restricted. 

It  is  to  trace  in  outline  this  gradual  transformation  in  our 
tangible  system  for  expressing  our  economic  faith  in  each  other 
which  forms  the  topic  for  this  present  chapter.  In  every  phase 
of  that  history,  we  believe,  it  will  appear  that  it  has  always  been 
a  defect  on  the  part  of  the  tangible  instrument  which  has  taken 
the  initiative  in  causing  a  collapse  of  the  intangible  public 
sentiment  of  credit.  But  when  it  came  to  recovery,  it  has  always 
been  the  intangible  sentiment  which  took  the  lead  in  building 
itself  up  again — through  that  mystic  force  of  growth  which  is 
inherent  in  all  forms  of  life — so  soon  as  some  remedy  of  the 
original  disturbing  defect  had  become  apparent. 

The  Transforming  Power  of  Credit. — Returning  now  to  the 
imaginary  community  of  twenty,  it  is  seen  transacting  all  its 
interchanges  of  service  and  commodity  by  the  circulation  of 
mere  slips  of  paper,  representing  an  unseen  and  little  wanted 
lump  of  gold.  These  slips  now  travel  as  rapidly  as  possible 
from  man  to  man,  or  rest  with  one  or  another  as  his  stock  of 
reserve-money.  With  this  tangible  system  of  mutual  credit 
in  operation,  all  are  busy,  fed  and  happy.  Without  it,  all  are 
virtually  idle,  and  starve  in  misery. 

Yet,  after  such  an  important  and  active  function  in  the  main- 
tenance of  the  current  life  of  the  community,  each  slip  of 
paper  remains  in  the  hands  of  the  man  who  first  held  it,  un- 
impaired in  usefulness !  Such  is  the  marvelous  potency  of 
the  mere  presence  of  mutual  credit  in  modern  economic  re- 
lationships. The  system  of  paper  slips  (and  the  public's  faith 
in  them)  is  the  absolutely  necessary  and  all-powerful  economic 
catalyst  requisite  for  social  life.  Credit  is  as  essential  in  the 
body  economic  as  unnutritive  salt  and  water  are  in  the  in- 
dividual human  body. 

The  extent  to  which  this  situation  of  the  little  community 
of  twenty  must  be  magnified,  before  it  becomes  possible  to 


CREDIT  79 

picture  the  absolute  dependence  of  our  modern  communities  of 
tens,  hundreds  or  thousands  of  millions,  not  only  in  their  effi- 
ciency of  provision  of  daily  life-support  but  in  the  basic  stability 
of  their  governments  and  their  mutual  civilization,  is  beyond 
the  possibility  of  immediate  expression  in  words.  So  startling 
is  the  contrast  between  a  community  possessing  an  adequate 
system  of  credit-instruments,  and  the  same  people  lacking  it, 
that  it  is  difficult  to  convey  to  the  reader.  Those  violent  con- 
trasts which  we  observe  in  history  between  impoverished,  im- 
potent societies,  and  that  same  population,  often  only  a  few 
years  earlier  or  later,  in  a  state  of  affluence,  are  only  this. 

In  social  energetics  poverty  does  not  arise  necessarily  from 
the  destruction  of  tangible  wealth,  as  in  war,  nor  prosperity 
await  the  slow  accumulation  of  visible  property.  Instead,  the 
transition  occurs  suddenly,  in  either  direction,  according  as 
adequate,  acceptable  credit-instruments,  in  proper  volume,  ap- 
pear or  disappear. 

Thus  France,  in  1871,  was  poor  to  the  extent  of  famine.  Dog- 
meat  commanded  fabulous  prices  in  Paris.  The  city  was  in- 
vested by  Prussian  troops,  and  a  huge  indemnity  must  be  paid 
before  they  would  leave. 

Yet  Thiers  accepted  the  situation  with  courage,  issued  credit- 
instruments  wisely,  stood  back  of  them  with  determination,  and 
the  people  responded  with  faith  and  works.  Within  a  few 
years  the  indemnity  had  been  paid,  the  soil  had  been  freed  of 
foreign  troops,  and  France  had  become  the  banker  of  Europe. 

The  Confederate  States  of  America,  on  the  other  hand,  had 
been  left  by  our  Civil  War,  only  five  years  earlier,  in  a  similar 
condition.  Their  country  had  been  laid  waste  in  some  parts, 
it  is  true,  as  France  had  not ;  but  the  South  was  an  agricultural 
district,  and  therefore  not  so  sensitive  to  destruction  of  ap- 
pliances as  a  thickly  settled,  industrial  region  like  France. 
Moreover,  the  South  had  no  indemnity  to  pay. 

But  the  South  had  the  commercial  folly  to  repudiate  its 
war-debts.  Hence  credit  was  lacking,  cash  feared  to  enter  the 
country,  there  was  no  circulating-medium  upon  which  to  con- 
duct trade,  and  for  decades  the  land  was  paralyzed  by  its  forced 
dependence  upon  barter  for  its  feeble  domestic  interchange. 
Both  its  foreign  intercourse1  and  its  internal  productivities  were 
asphyxiated  by  its  lack  of  a  circulating  credit-medium. 

Had  the   South  but  shouldered  its  war-debt  with  shrewd- 


80  MODERN   ECONOMIC   TENDENCIES 

ness  as  well  as  confidence,  issued  credit-instruments  to  cover  it, 
and  announced  its  determination  to  pay,  it  would  immediately 
have  possessed  a  huge  fund  of  circulating-medium.  This  would 
have  liquidated  the  blood  in  its  economic  veins,  brought  in  cash 
from  the  North,  and  landed  it  in  solvency  many  years  before 
it  actually  arrived  there,  some  four  decades  after  the  war. 

Moreover,  according  to  the  best  traditions  of  modern  finance, 
it  would  never  have  had  to  pay  the  principal  of  this  debt.  By 
paying  the  interest  regularly  the  principal  could  have  been 
refunded  periodically,  in  ever  increasing  volume,  as  a  suitable 
opportunity  for  the  South's  financiers  to  invest. 

The  History  of  Credit. — In  order  to  secure  a  proper  per- 
spective at  least  a  glance  must  be  taken  at  the  history  of  this 
all-important  social  feature,  economic  credit.  Yet  a  glance 
will  suffice,  for  its  history  is  comparatively  brief.  While  pro- 
totypes may  be  found  centuries  back,  yet  credit  in  its  modern 
sense  and  effect  is  very  much  a  modern  institution. 

In  medieval  days  business  could  be,  and  had  to  be,  transacted 
either  by  barter  or  by  cash — either  coin  or  bullion.  There  were 
no  banks.  Individuals,  usually  of  the  Jewish  race,  assumed 
their  functions  as  best  an  individual  might.  Apparently,  after 
the  disappearance  of  the  ancient  banking  institutions  of 
Babylon,  Phoenicia,  Greece  and  Borne,  it  was  not  until  the 
twelfth  century  that  the  first  real  bank  made  its  appearance  in 
western  Europe. 

Even  then  these  banks  were  wholly  magazines  of  deposit, 
issuing  no  notes,  knowing  no  check-system  and  making  their 
loans  to  titled  individuals  rather  than  for  the  promotion  of 
industrial  enterprise.  Mr.  Robert  Howe,  in  his  "Evolution  of 
Banking/'1  states  the  situation  as  follows: 

"Modern  banking  can  be  said  to  have  had  its  origin  with 
the  establishment  of  the  Bank  of  England  in  1694  and  the 
Bank  of  Scotland  in  1695.  Previous  to  that  date  the  banks, 
such  as  the  Bank  of  Venice  (1191-1797),  Bank  of  Genoa 
(1407-1797),  Bank  of  Hamburg  (1619),  Bank  of  Stockholm 
(1668-1754)  and  the  Bank  of  Amsterdam  (1609-1790)  were 
banks  of  deposit.  Payments  in  business-transactions  during 
the  medieval  period  were  made  by  means  of  coins;  but  the 
inconvenience  of  handling  and  storing  large  numbers  of  coins, 
with  the  risk  of  loss  through  overvalued  or  debased  coins 
i  Permission  of  C.  H.  Kerr  &  Company,  Chicago. 


CREDIT  81 

and  the  risk  of  theft,  led  to  the  establishment  of  these  banks 
of  deposit,  where  the  coins  were  valued  once  for  all  and  were 
then  locked  up  in  the  bank-vaults  and  never  withdrawn,  but 
the  title  to  the  same  was  transferred  on  the  books  of  the 
bank.  .  .  .  The  banks  of  deposit  made  no  loans,  but  their 
income  was  derived  from  a  charge  that  was  made  for  each 
transfer  of  funds  on  the  books  of  the  bank. 

"Our  modern  banks  are  Banks  of  Discount,  as  distinguished 
from  their  predecessors,  the  Banks  of  Deposit,  and  have  given 
an  enormous  impetus  to  commerce.  They  have  been  able  to 
do  this  because  they  can  and  do  create  credit  that  circulates 
the  same  as  money,  and  in  a  far  more  convenient,  safe  and 
economical  form." 

While  there  were  doubtless  many  minor  instances  of  the 
private  devising  of  instruments  of  credit,  one  of  the  earliest 
and  virtually  the  first  governmental  system  of  credit  was  that 
of  the  "tallies"  which  played  so  important  a  part  in  English 
history.  Howe  is  quoted  again: 

"One  of  the  most  interesting  instances  of  the  use  of  repre- 
sentative money  is  found  in  the  English  Exchequer  tallies, 
which  circulated  in  England  for  over  six  hundred  years. 
These  were  adopted  as  a  means  of  financing  the  English 
treasury  by  the  fourth  son  of  William  the  Conqueror,  who 
ascended  the  throne  as  Henry  I  in  the  year  1100.  The 
tallies  were  of  wood  and  were  issued  by  Eoyal  Warrant.  All 
who  served  the  King  or  State  were  paid  with  them.  Sup- 
plies for  the  Eoyal  Household  and  army  were  purchased  with 
them  and  they  circulated  among  the  people  as  money  and 
were  used  as  such  in  exchanging  commodities.  They  were 
four-sided  rods  of  hazel  or  linden  wood  about  an  inch  in 
diameter.  The  amount  due  from  the  State  to  the  creditor 
was  designated  by  notches  cut  into  one  of  the  flat  sides  of  the 
rod.  .  .  .  The  amount  was  also  written  in  ink  on  two  op- 
posite sides.  The  rod  was  then  split  by  knife  and  mallet 
lengthwise  through  the  notches.  One-half  of  the  stick,  show- 
ing the  inscription  in  ink  and  one-half  of  the  notches  was 
given  to  the  creditor  and  one-half  was  placed  in  the  treasury. 
.  .  .  They  did  not  pretend  to  be  based  upon  gold  or  silver. 
They  were  redeemed  by  the  Government  only  by  being  ac- 
cepted in  the  payment  of  taxes.  When  the  time  came  for 
the  collection  of  taxes  .  .  .  they  were  matched  with  the 
counter-tallies  and  where  the  two  edges  fitted  each  other  they 


82  MODERN  ECONOMIC  TENDENCIES 

were  said  to  'tally/    After  being  accepted  in  payment  of  taxes 
they  were  broken  in  half  and  were  thus  cancelled. 

"When  the  Bank  of  England  was  established  in  1694  there 
were  about  $70,000,000  in  wooden  tallies  in  circulation  in 
England.  The  Bank  enjoyed  the  privilege  of  issuing  paper- 
currency  for  the  first  time  in  England.  .  .  .  The  use  of  the 
paper  bank-notes  and  the  exchequer  bills  gradually  displaced 
the  wooden  tallies  in  the  more  important  business-transac- 
tions, but  it  was  not  until  1783  that  their  use  was  abolished  by 
act  of  Parliament.  In  spite  of  this  act  their  use  was  not 
finally  abandoned  by  the  government  until  1826." 

Up  to  about  1780  the  Bank  of  England  enjoyed  a  monopoly 
of  the  privilege  of  issue  of  bank-notes  as  a  form  of  credit  for 
circulating-medium;  but  at  that  time  the  check-system  was 
devised  by  other  banks,  as  a  means  for  competing  in  this  service, 
and  soon  came  into  adoption.  As  Howe  says : 

"The  banks  that  began  to  be  established  in  the  United  States 
about  the  year  1800  followed  exactly  English  methods." 

Stock-trading. — Up  to  this  time,  too,  public  subscription  to  the 
stock  of  corporations  was  virtually  unknown.  It  is  true  that  bank- 
shares  were  bought  and  sold,  but  the  owners  of  such  shares  were 
still  a  small  minority,  although  already  a  step  away  from  the 
more  exclusive  ownership  of  banks  of  earlier  days.  It  is  also 
true  that  public  speculation  in  such  corporations  as  the  great 
"South  Sea  bubble"  in  the  eighteenth  century  was  one  of  the 
picturesque  signs  of  early  progress  toward  commercialism.  But 
such  enterprises  were  purely  gambling-swindles,  based  upon 
property  in  unknown  parts  of  the  world. 

The  second  half  of  that  century  also  witnessed  the  formation 
of  the  great  "British  East  India  Company,"  which  until  1833 
enjoyed  complete  monopoly  of  trade  between  England  and 
India,  including  largely  the  China  trade ;  and  in  this  the  public 
invested.  But  none  of  these  limited  instances  parallels  in  de- 
gree our  modern  reliance  upon  public  trading  in  the  securities 
issued  by  corporations  performing  every  local  or  domestic 
service. 

While  the  growth  of  public  stock-trading  was  gradual,  of 
course,  yet  its  modern  form  really  arose  in  this  country  only 
about  the  year  1840.  At  that  time  the  recent  invention  of  the 


CREDIT  83 

steam-passenger-railway,  in  1829,  and  the  inception  of  steam- 
transatlantic  service  in  1837 — following  the  earlier  growth  of 
the  factory  promoted  by  stationary  steam-power  and  the  hy- 
draulic turbine,  and  the  rapid  development  of  canal  and  river 
navigation — had  initiated  an  outburst  of  enterprise  in  building 
facilities  for  communication  which  created  heavy  demands  for 
credit.  At  first  this  was  secured,  as  a  matter  of  course,  by  gov- 
ernmental (federal,  state  or  local)  issue.  But  these  public  en- 
terprises failing  financially,  private  enterprise  and  credit  re- 
placed them,  and  the  modern  system  was  fairly  inaugurated. 

It  was  in  pursuance  of  this  original  tradition  that,  until  almost 
the  close  of  the  nineteenth  century,  public  opinion  contented 
itself  almost  entirely  with  speculation  in  the  securities  issued 
by  railway  or  mining  corporations;  and  the  history  of  "wild- 
cat" railroads  and  "salted"  mines  which  followed  is  as  varie- 
gated and  tragic  reading  as  one  could  wish.  But  about  1890 
the  "industrials" — securities  issued  by  corporations  conducting 
the  utmost  variety  of  manufacturing  or  other  service — also  be- 
came fully  recognized  as  fit  subject  for  public  speculation;  and 
since  then  the  modern  system  of  negotiable  commercial  credit 
may  be  regarded  as  completely  in  force.  It  is  only  since  1900, 
however,  that  the  rate  of  issue  of  such  securities  has  proceeded 
at  a  rate  which  may  be  called  modern. 

Returning  to  the  banks,  while  their  part  in  public  credit  was 
at  first  confined  to  the  issue  of  bank-notes,  loans  being  confined 
to  personal  relationships  on  the  part  of  members  of  the  bank, 
yet  gradually  the  general  business  of  loaning  against  deposits 
by  the  bank  itself,  of  purchasing  mortgages,  investing  in  bills 
of  exchange,  promoting  bond-issues,  discounting  private  notes 
and  trading  in  "commercial  paper"  of  all  sorts  by  the  bank 
itself,  has  become  the  major  interest  in  modern  banking.  Since 
the  opening  of  the  present  century  this  aspect  of  banking  has 
completely  revolutionized  the  standard  practice  in  financing  new 
corporations,  big  industrial  enterprises  and  vast  governmental 
needs. 

The  modern  social  problem  cannot  possibly  be  comprehended 
correctly  without  recognition  of  this  recent  transformation  in 
our  financial  foundation — credit.  Again  quoting  Howe : 

"At  first  the  liabilities  of  the  banks  for  notes  in  circulation 
far  exceeded  the  liabilities  under  the  head  of  deposits;  but, 


84  MODERN   ECONOMIC   TENDENCIES 

as  the  use  of  bank-checks  in  place  of  currency  grew,  the 
ratio  changed  and  has  resulted  in  the  present  condition,  where 
the  circulation-liability  of  the  National  Banks  is  about 
$750,000,000  while  the  liability  to  depositors  is  upwards  of 
$15,000,000,000. 

"A  most  profoundly  erroneous  impression  is  made  on  the 
mind  of  the  public  by  the  published  statements  of  the  amount 
of  liabilities  of  the  banks  under  the  head  of  'Deposits.'  It  is 
almost,  if  not  quite,  universally  believed  that  the  so-called 
deposits  are  deposits  in  actual  cash,  while  the  truth  is,  in  so 
far  as  the  deposits  exceed  the  cash  on  hand,  they  are  the 
proceeds  of  discounted  commercial  paper.  Banks  do  not  loan 
money.  They  loan  credit.  They  create  this  credit  and  charge 
interest  for  the  use  of  it." 

Classification  of  Forms  of  Credit. — The  present  credit-system, 
therefore,  may  be  taken  as  made  up  of  the  following  general 
classes  of  credit-instrument,  in  chief;  but  a  complete  list  of  all 
the  varied  forms  of  paper  representing  merchandise  or  the  hope 
of  merchandise,  or  profits  or  the  hope  of  profits,  which  are  made 
the  subject  of  negotiation  and  loan  in  the  financial  world,  would 
be  unending. 

(1)  Governmental  paper-currency,  issued  against  gold  coin 
or  bullion,  with  a  minor  proportion  of  silver-certificates. 

(2)  Bank-notes  issued  more  or  less  directly  against  the  same 
base,  as  specified  by  law.    The  stability  of  these  two  classes  of 
instrument  depends,  first,  upon  the  proportion  of  gold  to  paper 
issued  against  it,  and  secondly  to  the  general  stability  of  other 
economic  conditions.     In  a  quiet,  prosperous  period  the  pro- 
portion of  paper  to  gold  may  be  high  without  collapse;  but  as 
disturbances  arise  from  without,  these  will  find  reflection  within, 
in  a  collapse  of  the  currency,  unless  the  proportion  of  paper  to 
gold  is  low  enough  to  reassure  even  the  timid.    As  already  noted, 
we  are  not  likely  to  have  again  a  panic  due  to  the  inflation  of 
paper  currency,  although  we  are  most  likely  to  have  one  from  the 
over-expansion  of  other  paper  instruments  of  credit. 

(3)  Governmental  bonds:  federal,  state,  county  or  municipal. 
The  stability  of  this  class  depends  upon  public  faith  in  the 
ability  of  the  government  to  tax  the  public  itself  to  the  amount 
requisite  for  redemption.     In  this  indirect  way  this  class  falls 
into  identity  with  the  following  classes,  in  resting  upon  the 
general  wealth  of  the  land.    But  it  must  not  be  forgotten  that 
the  stability  of  governmental  bonds  stands  also  upon  the  public 


CREDIT  85 

faith  that  the  money  expended  under  them  went  for  public 
improvements  which  are  wise,  productive  and  profitable.  The 
widespread  doctrine  that  a  governmental  tax  is  a  pure  loss  to 
the  tax-payer  is  most  misleading.  Most  taxes  are  investments 
much  more  wise,  from  the  viewpoint  of  good  to  the  greatest 
number,  than  any  investments  in  business. 

(4)  Bonds  issued  by  private  corporations,  based  upon  mort- 
gage of  plant  and  earning-capacity. 

(5)  Stock  and  short-term  notes  issued  by  private  corpora- 
tions, based  upon  earning-capacity. 

(6)  Bank-loans,  issued  against  deposits  or  against  the  above 
securities. 

(7)  Loans  by  pawn-brokers  or  private  capitalists,  based  upon 
merchandise. 

(8)  Mortgages  upon  land,  buildings,  etc. 

(9)  Savings-bank  deposits,  postal  savings,  etc. 

(10)  Certificates  of  building  and  loan  associations,  benevolent 
societies,  etc. 

(11)  Insurance-policies  and  loans  thereon. 

(12)  Letters  patent,  copyrights,  etc. 

(13)  Bills  of  exchange,  warehouse-receipts,  etc.,  based  upon 
merchandise  and  usually  endorsed  by  two  names — called  "com- 
mercial paper." 

(14)  Checks  and  clearing-house  certificates,  issued  against 
deposits. 

(15)  Promissory  notes  issued  by  private  corporations  or  in- 
dividuals, based  upon  the  most  general  aspect  of  the  issuant's 
business-record  and  prospective  ability  to  redeem — sometimes 
endorsed  by  two  names  and  called  "commercial  paper"  and 
sometimes  merely  "one-name  paper." 

(16)  Open   accounts   between   seller   and   buyer — still   more 
vague  in  their  basis  upon  the  general  probability  of  their  being 
redeemed. 

Beyond  this  general  classification  lies  an  intricacy  of  detail 
of  "margins,"  "shorts,"  "call-money,"  discounts,  etc.,  etc.,  into 
which  we  need  not  enter.  In  some  respects  some  of  the  above 
issues  of  credit-instrument  are  duplications  of  others — as  when, 
for  instance,  the  United  States  postal  savings-bank  pays  a  small 
interest-rate  to  the  depositor  and  then  redeposits  the  savings 
in  a  private  bank  paying  somewhat  higher  interest,  against  which 
deposits  the  private  bank  deals  in  securities  paying  a  still  higher 
rate.  But  this  duplication  is  only  partial.  It  is  mentioned  only 
to  assure  that  it  has  not  been  overlooked. 


86  MODERN  ECONOMIC  TENDENCIES 

Credit-agencies. — In  order  to  place  before  the  reader  the 
aspect  in  which  all  this  intricate  system  of  credit-instruments 
appears  to  those  whose  lives  are  spent  in  its  maintenance,  before 
drawing  our  own  picture  of  it  from  the  Consumer's  point  of 
view,  the  following  quotations  from  financial  authorities  are 
offered.  First  from  Mr.  Ingle,  quoted  above : 

"While  credits  in  one  form  or  another,  aggregating  an 
enormous  total,  are  granted  by  sellers  to  purchasers,  the  banks 
of  the  country  are,  shall  we  say,  the  impersonal  agencies 
which,  in  undertaking  the  responsibility  of  collecting  free 
capital  into  reservoirs,  loan  it  to  that  part  of  the  business- 
public  needing  accommodation.  The  measure  of  ability  of 
any  bank  to  extend  credit,  generally  speaking,  is  the  net 
liability  of  such  bank  to  its  depositors.  Withdraw  deposits 
to  any  material  degree  and  a  bank  is  required  to  demand  pay- 
ment of  outstanding  loans  or  reinforce  its  cash  by  borrowing. 
In  normal  times  and  in  local  situations  either  remedy  is 
usually  available,  but  when  times  are  out  of  joint,  as  for 
instance  when  over-expansion  of  credit  becomes  all  too  ap- 
parent and  is  evidenced  in  country-wide  conditions,  this  ability 
either  to  collect  maturing  obligations  or  to  borrow  in  order 
to  meet  deposit-withdrawals  is  seriously  abridged  or  alto- 
gether lost.  As  actual  cash-reserves  held  by  the  banks  hardly 
average  more  than  seven  per  cent  of  their  deposit-liability, 
it  is  easily  seen  that  a  relatively  small  demand  for  the  pay- 
ment of  deposits  in  actual  lawful  money  must  so  deplete 
their  resources  as  to  compel  suspension  of  payments,  some- 
thing which  has  occurred  several  times,  making  it  imperative 
to  resort  to  extra-legal  and  unsound  practices,  tolerated  simply 
as  a  matter  of  immediate  necessity.  .  .  .  For  many  years  this 
country,  in  developing  its  business  of  all  kinds  and,  under  the 
impetus  of  keen  and  oftentimes  unsafe  competition  in  very 
many  lines,  in  too  heavily  discounting  the  future,  has  been 
greatly  abusing  credit-rules  accepted  as  sound  by  every  other 
commercial  nation.  It  is  true  that  in  owning  only  a  most 
incomplete  and  inefficient  code  of  banking-law,  which  pro- 
vided no  means  of  serving  many  and  most  important  situa- 
tions requiring  the  aid  of  the  money-lender,  the  commercial 
banks  have  been  called  upon  and  used  in  a  manner  never 
contemplated  fifty  years  ago.  .  .  .  Years  ago,  when  a  merchant 
sold  a  bill  of  goods  he  would  receive  from  his  customer 
either  a  note  or  acceptance  for  the  value  of  the  invoice,  when 
both  parties  to  the  transaction  would  expect  the  account  to 
be  closed  by  payment  of  the  obligation  at  its  stated  maturity, 


CREDIT  87 

made  in  conformity  with  trade-practice.  Such  a  merchant 
when  needing  credit  would  offer  a  bank  his  customers'  obliga- 
tions bearing  his  endorsement,  two-name  paper  reflecting  a 
bona  fide  sale  and  purchase.  As  the  result  of  competition, 
which  took  the  form  not  only  of  price  and  profit  cutting  but 
of  settlement-terms,  the  one  time  usual  note  or  acceptance 
has  practically  disappeared  from  many  lines  of  trade,  and 
in  its  place  we  have  on  one  side  of  the  ledger  "open  accounts 
due  from  customers,"  while  among  the  liabilities  appear  "bills 
payable,"  the  direct  and  generally  unsupported  obligation 
of  the  merchant.  Such  notes  issued  against  the  general  as- 
sets of  their  makers  are  what  is  known  as  "single-name  paper." 
If  one  could  be  sure  that  the  average  merchant  would  be 
proof  against  the  temptation  either  to  over-trade  or  to  inflate 
reported  value  of  assets,  a  single-name  note  against  liquid 
assets,  such  as  good  book-accounts,  would  be  just  as  good  and 
as  readily  collectible  as  would  be  the  note  of  one  or  more 
debtors  endorsed  by  the  merchant.  Unfortunately,  however, 
a  very  great  number  of  traders  do  not  limit  their  borrowings 
to  an  amount  fairly  related  to  the  total  of  quickly  realizable 
inventory  and  book-accounts  made  for  settlement  at  a  de- 
termined date.  .  .  .  Many  merchants  enjoying  good  credit  on 
their  single-name  paper  are  averse  to  returning  to  old-time 
practice,  as  under  existing  conditions  such  merchants  really 
are  doing  a  banking-business  on  quite  a  generous  scale.  They 
are  able  to  borrow  on  close  terms,  when  they  extend  open 
credit  to  their  customers  on  terms  which  many  times  yield  not 
only  two  to  four  per  cent  profit  on  the  credit  itself,  but 
higher  prices  for  goods  than  would  otherwise  be  paid.  Not 
only  is  the  banker's  field  thus  usurped,  but  the  customer  is 
trained  to  postpone  pay-day.  ...  In  practice  the  banks 
handle  a  great  volume  of  single-name  notes  and  only  an  in- 
significant quantity  of  real  commercial  paper,  .  .  ." 

Mr.  Edmund  D.  Fisher,  Deputy  Comptroller,  City  of  New 
York,  in  a  recent  address  upon  "The  Relation  Between  Fixed 
and  Fluid  Credit,"  before  the  American  Bankers  Association, 
said: 

"Credit  is  the  chief  element  in  modern  exchange  through 
the  credit-currency  of  banking.  ...  It  is  the  medium  through 
which  commodities  are  virtually  enabled  to  exchange  them- 
selves in  terms  of  actual  money.  .  .  .  Recent  banking  prac- 
tice has  developed  large  volumes  of  deposit-currency  based  upon 
fixed  forms  of  credit,  and  the  use  of  this  currency  has  dis- 


88  MODERN   ECONOMIC   TENDENCIES 

turbed  price-relations.  .  .  .  Through  the  loan,  deposit  and 
check  process  of  modern  banking,  the  proceeds  of  loans  upon 
shares  of  corporate  business  and  on  dwelling-houses  and  other 
evidences  of  fixed  value  are  added  to  the  volume  of  basic 
currency.  .  .  .  The  vast  growth  of  the  non-commercial  forms 
of  banking-enterprise  during  the  last  fifteen  years,  manu- 
facturing deposit-currency  mainly  through  loans  on  the  col- 
lateral security  of  new  corporate  enterprises,  probably  has  been 
the  chief  element  in  price-inflation." 

Finance  and  Ethics. — A  glimpse  at  the  corresponding  change 
which  has  come  over  our  ethical  standards  to  correspond  with 
the  progress  in  banking-methods  is  given  by  Professor  E.  D. 
Howard,  of  Northwestern  University,  in  his  "Money  and 
Banking"  :2 

"It  is  a  curious  fact  that  this  most  vital  part  of  civiliza- 
tion and  commerce — money  and  banking — has  not  been  un- 
derstood and  appreciated  until  recent  times.  A  few  centuries 
ago  the  merchant  was  regarded  with  suspicion  and  placed  not 
far  above  the  thief  in  the  social  scale.  The  merchant  who 
bought  an  article  for  $1  and  sold  it  for  $1.50  was  thought 
to  have  robbed  the  purchaser  of  fifty  cents.  The  banker  who 
loaned  money  at  interest  violated  one  of  the  laws  of  the 
church  which  forbade  taking  of  usury,  as  interest  was  called 
at  that  time." 

Strange  how  prone  is  the  most  serious  and  careful  of  modern 
public  thought  to  regard  those  early  and  primitive  moral 
scruples  as  correct!  We  are  rapidly  re-approaching  the  point, 
not  of  saying  that  all  merchants  are  thieves,  but  that  if  their 
profits  really  represent  a  useful  service  then  it  is  inconceivable 
that  they  should  object  to  receiving  their  pay  in  the  form  of 
a  salary  proportioned  to  the  Consumer's  estimate  of  the  service 
performed. 

Insurance-credit.— If  doubt  should  exist  in  the  mind  of  the 
reader  as  to  insurance-policies  being  a  part  of  the  credit-system, 
the  following  quotation  from  "Relation  of  Life-insurance  to 
the  Credit-fabric,"  an  article  by  Mr.  A.  B.  Hepburn,  Chairman 
Board  of  Directors,  Chase  National  Bank,  in  Rand-McNally's 
Bankers'  Monthly  for  March,  1915,  will  reassure: 

"The  aggregate  resources  of  the  New  York  Life,  Mutual, 
Equitable,  Prudential  and  Metropolitan  were  in  1879  $166,- 
2  Permission  of  Alexander  Hamilton  Institute,  New  York  City. 


CREDIT  89 

296,822,  and  their  aggregate  outstanding  insurance  was 
$603,553,606.  According  to  their  reports  for  1913  the  ag- 
gregate resources  of  these  companies  had  grown,  in  the  in- 
tervening thirty-four  years,  to  $2,694,591,746,  and  their 
outstanding  insurance  had  reached  the  enormous  total  of  $7,325- 
711,135  of  ordinary  insurance,  and  including  the  industrial 
insurance  of  the  Metropolitan  and  Prudential,  the  grand  total 
reaches  $10,566,042,247. 

"I  have  presented  these  figures  in  this  way  in  order  to 
emphasize  the  fact  that  these  institutions  are  the  greatest 
investment-banks  in  the  world;  and  indeed  they  practice  a 
measure  of  commercial  banking,  since  life-insurance  com- 
panies have  adopted  the  policy  of  loaning  to  the  insured  upon 
their  policies  as  collateral.  .  .  .  Life-insurance  companies  and 
banks  both  deal  in  credit  and  subsist  upon  credit,  and  both 
draw  from  the  public  the  financial  resources  with  which  they 
in  turn  serve  the  public." 

These  data,  reduced  to  terms  of  population,  show  the  relative 
increase  of  insurance  of  this  sort  per  capita  in  Table  7.  It  is 
certain,  however,  that  this  average  rate  of  increase  has  not  been 
evenly  maintained.  Since  1898  it  has  undergone  marked  ac- 
celeration. 

TABLE  7 
GROWTH  IN  INSURANCE  (DOLLARS  PER  CAPITA),  1879 "TO  1913 

1879.  Resources $3 . 39      Insurance  in  force $12 . 30 

1913.  27.67  "         "      "    108.50 

Average  increase  per  annum,  in  per  cent: 

Resources 6.4        Insurance  in  force 6.6 

Aggregate  Credit.— The  task  next  in  order— that  of  a  statis- 
tical measure  of  the  recent  increase  in  aggregate  volume  of 
credit  from  all  the  sources  listed  above — is  again  one  fit  for  an 
entire  corps  of  professional  investigators,  publishing  a  special 
treatise,  rather  than  for  a  private  author  with  only  a  few  pages 
at  command.  Yet  here  again  the  need  is  imperative  for  doing 
the  best  possible  within  the  limits  of  a  single  chapter. 

The  prime  obstacle  to  any  accuracy  in  estimate  of  the  volume 
of  credit-instruments  afloat  at  any  one  time  is,  first,  their  con- 
stantly varying  market-value,  and  secondly,  their  apparent 
duplication.  Thus  a  given  amount  of  gold,  or  value  of  plant, 
may  serve  as  a  basis  for  the  issue  of  bonds  or  stock,  or  both,  to 
an  aggregate  face-value  far  greater  than  the  value  of  the  basis. 


90  MODERN   ECONOMIC   TENDENCIES 

The  difference  rests  upon  the  faith  that,  when  time  permits, 
the  paper  can  be  made  to  represent  an  earning-capacity  equal 
to  its  face. 

These  bonds  and  stock-certificates  may  then  be  deposited  as 
a  basis  for  a  bank-loan  of,  say,  double  or  thrice  the  original 
sum,  and  this  loan  may  then  be  used  in  a  business  which  grants 
to  its  customers  open-account  credits  amounting  to  four  or  five 
times  the  original  sum.  In  each  case  the  interest-rate  rises  as 
the  risk  increases  of  failure  to  make  expectations  good;  but 
the  negotiable  value  of  the  credit-instrument  in  each  case  stands 
in  the  proportions  stated,  nevertheless.  And  in  this  sense  there 
can  exist  no  duplications. 

The  extent  to  which  this  process,  in  one  form  or  another, 
actually  prevails  in  normal,  legal  business  is  beyond  the  realiza- 
tion of  even  the  average  businessman,  and  far  beyond  the  ken 
of  the  lay  reader.  It  is  accomplished  in  many,  many  different 
ways,  some  of  which  look  little  alike;  yet  they  all  amount  to 
the  same  end  in  effect,  namely,  the  expansion,  under  legal  title 
as  the  property  of  the  commercialist  promoting  the  "deal,"  of 
credit-instruments  which  rest  their  value  upon  a  state  of  mind, 
or  activity  of  body  and  brain,  on  the  part  of  millions  of  people. 

The  Normal  Expansion  of  Commercial  Credits. — It  is  of 
the  utmost  importance,  if  one  is  to  understand  the  economic  trend 
of  the  times,  to  secure  some  adequate  picture  of  the  manner 
and  the  rate  in  which  this  modern  commercial  form  of  national 
circulating-medium  finds  that  expansion  which  is  requisite  for 
the  increasing  population  and  the  growing  volume  of  business 
per  capita.  Yet,  in  seeking  this  picture,  we  shall  not  have  re- 
course merely  to  the  columns  of  statistics  which  accompany  this 
chapter  in  their  proper  place;  for  while  they  may  tell  amounts 
most  accurately,  they  give  no  inkling  as  to  manner. 

Indeed,  in  this  particular  quest  it  is  best  to  rely  merely  upon 
the  news-columns  of  the  conservative  daily  press  for  reports  of 
typical  daily  instances,  rather  than  upon  official  reports  of  ag- 
gregates; for  our  aim  is  not  merely  to  ascertain  the  hidden 
facts,  but  what  the  people  fully  know  as  to  those  facts — if  they 
would  but  open  their  eyes  as  they  read.  For  this  reason  we 
quote  below  typical  press-reports  of  commercial  expansions, 
chiefly  from  the  columns  of  the  New  York  Times,  a  sheet 
avowedly  favorable  to  commercialistic  philosophies,  and  con- 
servative and  reliable  as  to  news. 


CREDIT  91 

The  data  thus  published  are  probably  as  accurate  as  the 
official  reports  from  which  they  purport  to  come ;  while  the  fact 
that  they  are  put  forth  by  a  staunch  advocate  of  commercialism, 
yet  without  adverse  comment — even  from  the  public  to  which 
they  are  thus  advertised — is  worth  as  much  as  the  data  them- 
selves. For  this  proves  that  they  are  illustrations  of  normal 
or  even  praiseworthy  business-practice,  rather  than  sporadic 
instances  of  abuse  selected  to  bolster  up  our  argument.  They 
stand  as  proof,  also,  of  that  public  indifference  to  these  acts 
which  is  itself  a  far  more  tragic  menace  for  the  future  than  are 
the  acts  themselves. 

Nor  are  these  instances  adduced  below  to  be  misunderstood 
as  condemned  herein  because  their  profits  are  big.  Big  in- 
stances are  chosen  only  because  they  can  be  seen.  But  the  real 
problem  of  the  land  lies  in  the  fact  that  all  over  its  territory 
smaller  men  are  doing  this  same  thing  upon  a  smaller  scale, 
but  multiplied  by  millions  into  a  gigantic  aggregate.  If  com- 
mercialism be  an  evil,  then  the  petty  variety  of  it  embodied  in 
the  myriads  of  small  tradespeople  scattered  over  the  land  forms, 
in  aggregate,  an  evil  as  great  as  that  of  the  few  large  corpora- 
tions in  the  big  cities. 

Thus  in  January,  1913,  an  investigation  as  to  the  alleged 
"money-trust"  was  conducted  by  the  so-called  Pujo  Committee 
of  Congress.  According  to  reported  testimony  from  Chairman 
Baker,  of  the  Board  of  Directors  of  the  First  National  Bank, 
of  New  York,  that  institution  had  made  in  less  than  fifty 
years  a  profit  of  $86,504,901  upon  an  original  capital  of  $50,000, 
or  at  an  interest-rate  of  over  sixteen  per  cent,  compounded! 
During  the  decade  preceding  1913  the  bank  had  participated 
to  the  extent  of  $281,000,000  in  syndicate-deals  aggregating 
$2,248,000,000. 

According  to  the  same  authority,  during  the  sixteen  years 
preceding  the  inquiry  the  National  City  Bank  had  distributed 
over  $25,000,000  of  profits,  including  at  least  one  dividend  of 
forty  per  cent,  and  had  enjoyed  the  accumulation  of  a  surplus 
and  net  profit  of  over  $240,000,000. 

Again,  the  United  States  Currency  Bureau  report  for  1913 
revealed  aggregate  "earnings"  by  the  national  banks  of  the 
country  of  $160,980,084  within  the  year. 

According  to  the  public  press,  the  year  1911  showed  an 
accumulation  by  the  Lackawanna  road  of  a  surplus  of  $9,632,000, 


92  MODERN   ECONOMIC  TENDENCIES 

or  32  per  cent  upon  its  capital  stock,  as  compared  with  a  rate 
of  35.4  per  cent  for  the  year  before.  In  1916-17  this  same 
road  earned  38  per  cent,  distributing  20  per  cent  in  dividends, 
without  a  whisper  of  protest  anywhere  outside  the  socialist 
press,  revealing  any  public  opinion  that  such  acts  were  out- 
rageous. 

The  earnings  for  the  White  Star  line  of  transatlantic  steam- 
ships are  reported  as  60  per  cent,  a  rate  which  was  reduced  only 
to  30  per  cent  in  1912  by  the  fearful  tragedy  of  the  Titanic. 

Testimony  before  the  Interstate  Commerce  Commission  in 
November,  1913,  was  to  the  effect  that  a  syndicate  which  in- 
cluded several  officials  of  the  St.  Louis  &  Santa  Fe  company 
had  sold  to  that  system  a  small  road  at  a  profit  of  $3,891,000 
upon  an  investment  of  $3,000,000,  or  nearly  130  per  cent  of 
profit  in  a  single  turn-over — and  that,  too,  in  selling  a  property 
virtually  to  themselves,  so  that  every  stockholder  not  in  the 
syndicate  was  swindled  as  thoroughly  as  was  every  Consumer 
using  the  system. 

In  1916  was  announced  the  doubling  of  the  capital  stock  of 
the  Chase  National  Bank,  with  the  simultaneous  distribution 
of  a  cash-dividend  of  $500  per  share. 

In  1916  the  Vanadium  Company,  an  obscure  corporation 
formed  ten  years  previously  with  a  declared  capitalization  of 
only  $700,000,  and  in  all  probability  actually  funded  far  below 
that  figure,  was  reported  as  sold  for  $7,000,000,  on  a  stock- 
issue  of  $13,500,000.  The  profit  of  one  operator  in  this  deal 
was  reported  as  between  $1,500,000  and  $2,000,000  during  a 
single  night. 

In  1917  the  properties  which  originally  formed  the  Standard 
Oil  Company  of  New  Jersey,  before  its  dissolution  under  the 
Sherman  anti-trust  law,  were  reported  as  having  distributed 
$629,000,000  since  the  dissolution— $406,000,000  in  cash  and 
$223,000,000  in  stock — or  over  six  times  the  capitalization.  In 
September,  1916,  the  fluctuations  in  valuation  of  stock  on  'change 
were  reported  as  adding  eight  millions  to  Mr.  Rockefeller's  for- 
tune in  a  single  day,  making  him  America's  first  billionaire. 

The  earnings  of  the  International  Mercantile  Marine  for  the 
first  five  months  of  1917  were  reported  as  $26,000,000.  The 
New  York  Herald  for  June  9,  1917,  reports  that  the  New  York 
Edison  Company  had  built  up  a  "contingent  fund" — correspond- 
ing with  what  the  railroads  call  a  "surplus"— of  $22,000,000 


CREDIT  9«3 

since  1904,  and  that  it  refused  to  use  any  part  of  this  money 
to  meet  the  present  increases  in  cost  of  operation. 

The  Times  for  Oct.  1,  1915,  reports  a  "curb-broker"  who 
made  $500,000  in  less  than  a  year,  from  $650  as  a  starter.  On 
Nov.  30,  1915,  it  reports  an  increase  in  the  stock  of  the  Saxon 
Motor  Company  from  $350,000  to  $6,000,000.  On  Feb.  6, 
1916,  it  reports  a  shipping-company  established  by  Mr.  C.  W. 
Morse,  the  ex-banker,  as  paying  a  cash-dividend  of  100  per 
cent  to  its  stockholders  within  less  than  a  month  from  the  date 
of  formation! 

On  January  26, 1915,  the  Fidelity  Trust  Company,  of  Newark, 
was  reported  as  declaring  a  dividend  of  375  per  cent.  On 
June  4,  1915,  the  stock  of  the  Ford  Motor  Company  was  re- 
ported as  increased  from  two  to  one  hundred  millions,  with 
a  simultaneous  declaration  of  a  stock-dividend  of  forty-eight 
millions.  Easy,  isn't  it? 

Mr.  Ford,  no  doubt,  did  an  extremely  valuable  thing  for  his 
country  when  he  judged  rightly  as  to  just  what  grade  of  car 
would  suit  the  largest  number  of  purchasers,  and  then  built  it 
well.  Our  point  is  not  that  he  may  not  have  rightfully  earned 
the  sum  reaching  him.  That  is  for  the  Consumers  to  decide. 

The  point  is  that,  if  he  did  earn  it,  he  earned  it  when  he 
built  the  cars,  and  not  when,  by  simply  "declaring"  a  stock- 
dividend,  he  and  his  directors  expanded  the  country's  indebted- 
ness to  them  in  a  breath,  in  a  manner  lacking  all  responsibility 
to  those  who  must  pay  these  moneys  thus  created  by  private 
dictum. 

On  April  26,  1916,  the  stock  of  Tiffany  &  Company  was 
appraised,  upon  affidavits  by  one  of  the  officers  of  the  company, 
at  a  premium  of  668  per  cent  above  par.  From  1891  to  1906 
the  Fifth  Avenue  Bank  was  reported  as  paying  a  regular  divi- 
dend of  100  per  cent  per  annum,  with  an  additional  dividend 
of  100  per  cent  in  1903,  120  per  cent  in  1904  and  150  per 
cent  in  1906.  Finally  a  stock-dividend  of  400  per  cent  was 
declared,  increasing  the  capital  from  one  to  five  millions. 
Simultaneously  the  dividend-rate  in  cash  was  reduced  to  a 
smaller  figure,  netting  to  the  stockholders  about  the  same  sum 
as  usual. 

The  Rate  of  Interest.— This  case  stands  as  an  illustration  of 
the  fact  noted  later  in  the  chapter  upon  Interest,  namely,  that 
the  financier  can  shift  at  any  time  from  a  high  rate  upon  one 


94  MODERN   ECONOMIC  TENDENCIES 

valuation  to  a  lower  rate  upon  a  higher  valuation — which  lower 
rate  can  afterwards  be  made  to  be  high  again — at  will,  without 
coercion  by  any  natural  law  of  interest-rate  whatever.  The  sole 
limit  to  interest-rate  is  what  can  be  abstracted  from  the  people. 
The  sole  reason  for  such  a  move  as  just  noted  is  to  blind  the 
public  by  a  nominally  lower  rate,  although  it  involves  exactly 
the  same  burden  upon  the  Consumer  as  before. 

As  incidental  evidence  that  the  problem  of  commercialism 
is  an  international  one,  and  that  America  does  not  monopolize 
these  instances,  it  may  be  noted  that  on  June  12,  1914,  the 
catering  firm  of  J.  Lyons  &  Company,  London,  declared  a 
dividend  which  completed  42  y2  per  cent  for  the  preceding  year. 
But  this  is  not  much.  England  or  any  other  country  must 
acknowledge  us  to  be  without  a  peer,  when  it  comes  to  com- 
mercialism. 

On  Sept.  16,  1914,  the  Times  reported  the  surplus  of 
the  Interborough-Metropolitan  Company,  a  corporation  holding 
nearly  thirty-four  millions  of  Interborough  Eapid  Transit 
stock,  as  having  grown  from  $788,514  to  $1,860,765,  within  a 
year.  On  Feb.  11,  1916,  it  tells  how  this  latter  company 
had  paid,  a  decade  before,  $1,500,000  for  a  tramroad  (Pelham 
Bay  &  City  Island)  which  afterwards  sold  for  $40,000. 

"Mr.  -          -  said  that  $350,000  was  paid  for  the  rail- 
road, while  the  remaining  $1,150,000  was  paid  to  Mr.  - 
for  his  services  in  supplying  the  'necessary  strength'  to  finance 
the  building  of  the  old  subway." 

Social  Control.— In  order  to  show  how  complete  and  demo- 
cratic is  our  control,  at  present,  over  this  constant  expansion 
of  capitalism  and  its  resultant  elevation  of  prices,  reference 
may  be  made  to  the  history  of  the  legal  restraint  of  the  Standard 
Oil  Company.  It  was  in  May,  1911,  that  this  corporation,  in 
submission  to  the  Sherman  anti-trust  law,  was  dissolved  into 
some  thirty-six  component  companies. 

Of  course  all  these  thirty-six  companies  then  maintained  a 
competition  for  the  privilege  of  keeping  down  the  price  of  oil 
which  can  only  be  called  cut-throat!  For  in  May,  1915,  gaso- 
line retailed  on  the  road  for  12  cents.  By  six  months  later 
it  had  risen  to  18  cents,  and  by  three  years  later  to  28  cents. 
This  was  in  part  due  to  the  war;  but  on  the  other  hand  must 
be  kept  in  mind  that  supplies  were  also  increasing  rapidly 
during  that  period. 


CREDIT  95 

On  Nov.  30,  1915,  the  Times  reported  that  the  stock  of 
these  thirty-six  companies  had  increased  in  valuation  by  more 
than  $148,000,000  within  a  fortnight.  During  the  year  1915 
the  Standard  Oil  Company  of  Indiana  had  earned  53  per  cent 
on  its  outstanding  stock,  as  compared  with  22  per  cent  in  1914. 

On  April  18,  1916,  the  Times  reported  in  detail  the  plan 
for  the  doubling  of  the  parent  company's  stock,  the  extra  hun- 
dred per  cent  to  be  distributed  to  the  stockholders  in  the  com- 
ponent companies  as  "a  melon" — this  being,  when  consum- 
mated, "the  seventeenth  distribution  of  stock  among  the  former 
subsidiaries  of  the  old  Standard  of  New  Jersey  since  that  com- 
pany was  dissolved." 

On  Dec.  30,  1916,  the  same  paper  stated  that  the  valuation 
of  Mr.  Rockefeller's  holdings  in  oil-stock  were  then  "two  and 
one-half  times  greater"  than  when  the  company  was  dis- 
solved, stock  which  had  been  quoted  at  $1500  a  share  thirteen 
months  before  being  then  worth  $2000.  The  increase  in  valua- 
tions in  Wall  street  were  reported  as  having  added  over  $8,000,000 
to  Mr.  Rockefeller's  property  in  a  single  day!  Yet  this  is  a 
gain  which,  if  made  by  that  exceptional  producer  who  might 
be  able  to  follow  Professor  Fisher's  rule,  at  the  rate  of  saving 
$10,000  annually  from  his  wages — at  the  expense  of  consider- 
able stinting — would  yet  require  eight  centuries  for  its  ac- 
cumulation ! 

On  July  1,  1915,  the  Delaware,  Lackawanna  &  Western  Coal 
Company  announced  that  it  had  taken  steps  to  comply  with  the 
recent  order  of  the  Supreme  Court  of  the  United  States,  that  it 
should  separate  from  the  railroad-company  of  similar  name.  But 
simultaneously  it  declared  a  dividend  of  52y%  per  cent,  in 
comparison  with  its  average  of  23  per  cent  during  the  preceding 
six  years,  and  in  its  report  of  a  fortnight  later  revealed  earn- 
ings amounting  to  over  90  per  cent  of  its  capital  stock  !  In  1916 
the  railroad-company  earned  over  38  per  cent  on  its  stock, 
nearly  twice  its  usual  dividend  of  20  per  cent,  and  an  eighth 
larger  than  during  the  previous  year. 

Public  Acceptance  of  Credit-expansion. — Yet  the  items  listed 
above  make  no  pretense  of  being  either  an  exhaustive  list  of 
such  instances,  nor  of  being  based  upon  a  complete  history  of 
any  of  the  enterprises  cited.  They  are  merely  illustrations 
culled  from  leading  daily  papers,  as  they  happened  to  come 
to  hand,  to  show  not  only  what  is  regarded  as  quite  customary 


96  MODERN   ECONOMIC   TENDENCIES 

within  the  financial  world,  but  also  what  is  frankly  revealed 
to  the  public. 

That  is  to  say,  the  public  knows  of  the  expansion  of  com- 
mercial credit  in  private  hands  at  the  rates  just  stated.  How 
much  worse  the  hidden  reality  may  be  can  only  be  guessed  from 
the  fact  that  all  ledgers  are  rigidly  sealed  against  inspection. 
If  the  commercialists  find  reason  for  complaint  in  what  the 
public  believes  about  them,  it  is  plainly  their  own  fault. 

The  Literary  Digest  for  June  27,  1914,  quotes  Sir  George 
Paish,  in  the  London  Statist,  as  placing  the  "marvelous"  growth 
of  the  United  Kingdom  in  wealth  as  from  about  $12,500,000,000 
in  1814  to  about  $85,000,000,000  in  1914 : 

"In  France  wealth  has  expanded  about  fivefold;  that  is, 
from  under  ten  billions  to  nearly  fifty  billions.  In  Germany 
progress  equally  remarkable  has  taken  place." 

Sir  George  gives  for  the  United  States  a  total  wealth  in  1814 
of  about  $1,750,000,000  and  a  total  wealth  now  of  $150,000,- 
000,000,  or  nearly  ninetyfold  increase!  Then,  after  reviewing 
the  marvelous  contrast  in  visible  conditions  attained  during  the 
century,  Sir  George  continues: 

"What  are  the  forces  to  which  we  owe  this  great  uplift  of 
the  whole  race?  Many  things,  both  mental  and  physical, 
acting  and  reacting  upon  each  other,  have  combined  to  bring 
about  the  new  conditions;  .  .  .  But  the  greatest  uplifting 
force  of  the  past  century  has  been  the  growth  of  a  spirit  of 
trust  and  of  confidence  between  man  and  man  and  between 
nation  and  nation.  This  new  spirit  has  infected  men  on 
every  side  of  their  activities,  .  .  .  One  of  the  most  noteworthy 
consequences  of  the  new  spirit  has  been  the  creation  of  a 
credit-system  which  embraces  the  whole  world,  and  which 
has  enabled  countries  to  be  populated,  towns  and  villages  to 
be  constructed,  agriculture  extended,  mines  developed,  and 
riches  transported  from  the  ends  of  the  earth  for  consump- 
tion and  use  wherever  they  are  needed." 

Yet  within  a  week  from  the  publication  of  these  words  broke 
forth  the  greatest  war  of  history.  The  existence  of  an  interna- 
tional credit-system  forms  no  bar  to  war.3 

'But  the  collapse  of  credit  may  be  worse  than  war.  The  winter  of 
1919-20  reveals  central  Europe  a  wreck  of  unemployment,  starvation 
and  misery,  largely  in  districts  which  suffered  no  appreciable  destruc- 
tion of  tangible  property.  But  what  is  gone  is  credit,  both  economic 
and  political. 


CREDIT  97 

These  illustrations  given  above  of  the  present  method  of 
expanding  our  volume  of  circulating  credit-instruments,  to  meet 
expanding  demands,  have  been  drawn  from  the  greatest  variety 
of  enterprises,  in  industry,  invention,  commerce  and  pure 
finance,  from  those  promoted  by  individuals  as  well  as  those 
for  which  huge  corporations  or  "trusts"  are  responsible.  In 
Chapter  XII  some  similar  expansions  of  railroad-capitalism  will 
be  found  quoted,  directly  from  the  sworn  testimony  of  prominent 
railway-officials. 

The  Modern  Method  of  Making  Money.— The  aim  in  ad- 
ducing all  of  these  instances  of  rapid  expansion  of  wealth  is 
not  at  all  to  "muck-rake"  proofs  of  individual  malefaction  on 
the  part  of  the  wealthy,  nor  to  gloat  over  their  horrid  injustice. 
It  is  merely  to  gather,  haphazard,  fair  samples  of  what  is  occur- 
ring daily  in  financial  circles,  as  characteristic  of  the  normal 
growth  of  commercialism,  and  to  show,  by  instances  so  big 
as  to  be  plainly  visible,  the  character  of  that  growth  which  now 
permeates  every  minute  cell  of  our  industro-commercial  system, 
from  corner-grocery  to  department-store.  In  this  growth  the 
aggregate  of  the  myriad  of  small  instances,  each  too  obscure 
to  attract  attention,  probably  exceeds  that  of  the  few  large  ones. 

Each  of  these  rapidly  swelling  credit-instruments  in  the 
cases  listed,  like  the  myriad  of  untold  smaller  ones  constantly 
being  turned  out  by  the  horde  of  petty  commercialists,  is 
measured  in  dollars,  and  has  the  same  purchasing-power  as  the 
same  number  of  dollars  earned  by  productive  labor.  However 
impossible  it  might  be  to  liquidate  the  whole,  or  even  any 
major  fraction,  of  these  huge  bulks  of  credit-securities  at  any 
one  time,  yet  the  entire  credit-system  and  business-world  de- 
pend, daily  and  hourly,  upon  the  universal  faith  and  fact  that 
any  reasonable  portion  of  these  instruments  is  convertible  at  any 
time  into  dollars;  and  the  dollars  thus  procured  will  buy  across 
the  shop-counter  exactly  what  the  working-man's  dollar  will 
buy.  In  fractional  degree  such  conversion  of  these  credits  into 
money  for  daily  purchases  is  actually  proceeding  at  all  times. 

The  Sole  Foundation  for  All  Forms  of  Credit-instrument.— 
The  real  basis  for  all  these  expanding  credits,  as  became  plain 
from  the  illustration  of  the  twenty  men,  and  as  actually  was 
true  of  the  English  tallies  for  over  six  centuries,  is  not  any 
particular  amount  of  gold  or  silver,  nor  even  any  specific  tangible 
property  of  any  sort,  necessarily,  but  merely  the  simultaneous 


98  MODERN   ECONOMIC  TENDENCIES 

faith  between  man  and  man,  amongst  many  millions,  that  each, 
co-operating  with  the  others,  and  with  the  aid  of  the  country's 
accumulation  of  cleared  land  and  productive  appliances,  is  able 
to  serve  or  supply  the  other,  that  he  is  desirous  of  doing  so,  and 
that  he  will  recognize  the  said  security  or  tatty  or  greenback 
or  what-not  as  a  symbol  of  this  readiness  and  ability  to  inter- 
change. 

Whatever  may  be  the  system  or  the  basis,  credit-instruments 
without  instrinsic  value  may  exist  to  the  volume  of  this  faith, 
and  no  more.  The  nominal  basis — gold — bears  to  this  useful, 
life-supporting  faith  merely  the  relation  which  the  bushel- 
basket  bears  to  a  cargo  of  wheat.  As  a  measure  it  is  most 
useful,  but  otherwise  it  is  valueless.  Wheat  without  any  bushel- 
basket  may  yet  feed  mankind ;  but  a  bushel-basket  without  wheat 
will  not  feed  a  rat. 

In  so  far  as  this  mutual  faith  is  rationally  backed  by  the 
existence  of  an  array  of  tangible  appliances  for  the  creation  of 
life-support,  just  so  far  these  appliances,  and  not  gold,  form 
the  major  basis  of  value  for  the  circulating  credit  instruments. 
Yet,  as  can  be  fully  realized  only  when  economic  analysis  has 
been  traced  to  its  uttermost,  it  is  not  merely  the  appliances  which 
support  public  credit.  It  is  the  form  of  relationship  embodied 
in  society,  as  solidified  in  constitution,  statutes,  common  law 
and  economic  tradition,  whereby  men  are  linked  with  each  other 
and  with  these  appliances  in  a  way  helpful  or  harmful,  that  a 
country's  credit-system  may  alone  be  assured  stability  or  in- 
stability. 

For,  however  more  important  the  appliances  may  be  than 
gold,  nevertheless  gold,  appliances  and  labor  may  all  be  there 
together — the  gold  pure,  the  appliances  efficient  and  the  men 
anxious  to  co-operate  in  production,  interchange  and  consump- 
tion— yet  all  these  processes  may  be  impossible.  The  nation 
may  yet  stand  paralyzed,  impoverished  and  destitute. 

Not  only  have  we  seen  this  phenomenon  repeatedly  in  coun- 
tries foreign  to  our  own — and  thanked  God  that  we  were  not 
so  stupid  as  they— but  it  has  repeatedly  occurred,  in  partial 
degree,  in  our  own  land,  in  times  of  panic.  Then  has  arisen  the 
astounding  spectacle  of  all  this  array  of  powerful  and  efficient 
appliances,  in  a  land  of  natural  plenty,  standing  unimpaired 
physically,  yet  quite  useless,  merely  because  men  cannot  agree 
upon  a  common  symbol  of  value-in-interchange. 


CREDIT  99 

To-day  we  rely  primarily,  for  this  symbol,  upon  a  system  of 
credit-instruments — interest-bearing  commercial  credits — the 
entire  negotiable,  circulatory  valuation  of  which  depends  upon 
the  prospect  of  drawing  upon  them  continued  future  interest 
or  dividend  payments.  With  the  variations  in  this  prospect  the 
valuations  of  these  credit-instruments  fluctuate  up  and  down, 
from  day  to  day  and  hour  to  hour,  so  wantonly  that  a  vast 
machinery  of  exchanges,  tickers,  "Wall-street  editions/'  etc., 
is  needed  in  order  to  keep  the  public  informed.  Occasionally 
comes  a  major  collapse  of  valuations,  in  some  "panic" ;  and  then 
factories  shut  down,  railroads  cut  their  schedules,  and  the 
public  suffers  inconvenience  or  hardships  in  manifold  ways. 

Commercial  Credit  versus  Factory-credit. — But  the  student 
of  economics,  when  considering  the  vital  function  of  credit  and 
credit-instruments  in  the  maintenance  of  the  country's  current 
life,  must  never  forget  that,  in  parallel  with  this  huge  system 
of  interest-bearing,  constantly  fluctuating,  commercial  credit- 
instruments,  there  always  operates  quietly,  stably  and  efficiently 
another  credit-system,  forming  a  diametric  contrast  therewith. 
This  is  the  equally  vast  aggregate  of  non-interest-bearing,  non- 
fluctuating,  non-negotiable  factory-credits,  in  the  form  of  shop- 
orders  or  requisitions,  whereby  our  most  costly  appliances  are 
continually  being  made  available  to  our  relatively  propertyless 
skilled  artisans. 

Two  things  in  particular  should  be  noted,  in  consideration 
of  this  most  important  contrast  between  our  two  accepted, 
parallel  systems  of  credit,  before  the  present  economic  situation 
can  be  at  all  understood.  The  first  of  these  is  that  all  credit- 
instruments,  whether  of  the  factory  or  the  commercial  variety, 
are  needed  solely  in  order  to  bridge  gaps  in  ownership  between 
the  man-who-has  and  the  man-who-needs-to-use.  Some  form  of 
credit-instrument  is  requisite  for  extending  to  the  man-who-has- 
not  that  opportunity  to  use  some  appliance  which  society  most 
vitally  needs  to  have  him  use.  And  we  shall  never  understand 
the  present  crisis  until  we  understand  tfiat  the  favor  embodied 
in  this  opportunity  is  extended  to  society,  and  not  to  the  man. 

In  the  factory-system  this  opportunity  to  use  is  merely  as- 
signed to  the  wage-earning  or  salaried  worker  who  is  fit  to  use 
the  appliance.  The  only  requisite  for  this  assignment  is  proof 
of  fitness  to  use.  A  huge  machine-tool,  or  a  steamship,  or  a 
hospital,  is  assigned  to  someone  skilled  in  the  use  of  such  a 


100  MODERN   ECONOMIC  TENDENCIES 

thing,  and  full  control  granted,  without  any  thought  of  the 
issue  of  any  credit-instrument  (other  than  the  order)  being 
necessary.  Still  less  is  there  any  thought  of  necessity  for  its 
bearing  interest. 

But  in  the  commercial  world,  on  the  other  hand,  credit  is 
constantly  being  extended,  not  to  the  man  whom  society  needs 
to  have  receive  credit,  namely,  the  man-who-has-no-property- 
but-has-skill.  Instead,  it  is  issued  in  huge  quantities  to  the 
man-who-has-property-but-no-craftsmanVskill. 

Secondly,  commercial  credits  are  not  issued  primarily  for  the 
facilitation  of  production.  Usually  they  accomplish  this  pur- 
pose, to  some  degree,  on  the  side;  but  it  is  a  secondary  function 
even  then.  Often  this  pretense  is  frankly  dropped. 

The  primary  function  of  the  issue  of  commercial  credits — 
upon  which,  indeed,  their  existence  depends — is  the  extraction 
of  interest  from  the  Consumer.  For  no  commercial  credit- 
instrument  which  fails  to  perform  this  primary  function  can 
remain  long  in  the  land  of  the  living,  no  matter  how  efficiently 
it  may  aid  production.  The  community's  need  for  true  credit 
may  be  never  so  dire;  it  gets  none  from  the  commercial  system 
unless  it  first  pays  the  tribute  exacted  for  its  issue,  called  in- 
terest or  dividends. 

Social  Effects  Independent  of  Moral  Intent. — It  is  worth 
while,  therefore,  to  examine  the  history  of  this  modern  accumula- 
tion of  credit-instruments.  In  chasing  this  history  relentlessly 
to  its  bearing  upon  social  right  or  wrong  we  are  not  interested 
at  all  in  any  question  whether,  in  its  gradual  erection,  there 
existed  any  deliberate,  malicious  intent  to  exploit  the  Con- 
sumer, or  not,  although  such  conscious  sentiment  may  at  times 
have  been  present.  We  are  interested  solely  in  the  aggregate, 
subconscious  growth  of  the  institution,  amongst  a  mass  of  men 
the  great  majority  of  whom  were  unquestionably  conscientious, 
upright  and  humane.  They  were  merely  unaware  of  all  the 
economic  results  of  what  they  did. 

The  History  of  Credit-expansion. — Just  how  old  the  process 
of  creating  and  accumulating  credit-instruments  for  private 
profit  may  be,  cannot  be  said.  In  embryo  it  has  probably  pre- 
vailed for  many  generations,  if  not  centuries.  But  it  was  not 
until  comparatively  recently — early  in  the  nineteenth  century 
— that  the  accession  of  the  merchant,  banker,  broker  and  pro- 
moter to  social  recognition  (which  was  one  of  the  novel  and 


CREDIT  roi 

surprising  fruits  of  the  new  American  ethics  of  liberty  and 
equality  for  all  men),  coupled  with  the  beginnings  of  modern 
congestion  in  cities,  had  given  this  process  an  appreciable  start 
into  that  prerogative  and  power  as  a  national  institution  which 
is  our  most  distinctive  hallmark  of  Americanism  to-day. 

Diagrammatic  illustration  of  the  principal  phase  of  this 
growth  since  1840  will  be  given  later,  with  a  tabular  exhibit 
of  banking- figures  since  1865.  These  will  show  that,  whereas 
the  start  must  have  been  made  not  long  before  1840  or  1850, 
and  at  first  was  gradual,  yet  progress  since  then  has  been  as 
that  of  a  snow-ball  rolling  down  a  mountainside — cumulative 
and  accelerating.  Each  fresh  outburst  of  commercial  activity, 
following  some  disturbance  such  as  the  Civil  War,  or  the  panic 
of  1873,  has  accentuated  this  process  of  expansion  of  our 
volume  of  interest-bearing  credit-instruments.  Each  expira-. 
tion  of  some  fund  of  time-limited  paper  gave  opportunity  for 
another  refunding — and  these  refundings  have  always  been  in 
the  direction  of  expansion  rather  than  of  contraction. 

But  it  was  not  until  after  the  Spanish  War  of  1898  that 
occurred  that  most  phenomenal  distention  of  credit  of  all, 
amounting  almost  to  an  explosion,  which  astounded  even  the 
financiers  of  that  day  and  inaugurated  what  may  be  termed  the 
modern  era  of  credit.  Capitalizations  began  to  increase  at  a 
rate  which  was  dazing  to  more  old-fashioned  minds.  The 
volume  of  interest-bearing  securities  began  to  swell  by  methods 
which  remind  one  only  of  our  childish  way  of  "counting  one 
hundred"  when  we  were  "it"  at  "I  spy"— "Ten,  ten;  double 
ten;  forty-five  and  fifteen!"  How  the  commercialists  ever  ar- 
rived at  their  enormous  increases  in  capitalism  so  quickly  no  one 
could  ever  understand ;  but  arrive  they  did,  and  their  capitalism 
has  stuck  ever  since. 

Professor  John  E.  Wildman,  head  of  the  Department  of 
Accounting  in  New  York  University,  is  reported  as  saying, 
in  November,  1916: 

"The  trust  movement  in  the  United  States  began  in  1898. 
During  the  three  years  which  followed,  149  large  combina- 
tions with  a  total  capitalization  of  $3,578,650,000  were 
formed.  Many  writers  and  some  fairly  prominent  authori- 
ties predicted  failure.  It  was  agreed  that  no  one  man  or 
Board  of  Directors  could  successfully  administer  such  huge 
organizations.  .  .  .  But  new  methods  of  accounting  made  it 


102  MODERN   ECONOMIC  TENDENCIES 

possible  for  the  executives  who  were  placed  at  the  heads  of 
these  giant  corporations,  with  their  many  constituent  com- 
panies, to  have  laid  before  them  information  as  to  what  was 
being  done.  Accounting  made  it  possible  to  run  a  huge  busi- 
ness as  intelligently  as  a  small  business  had  previously  been 
run." 

Here  Professor  Wildman's  text  is  accounting,  and  this  part 
of  his  lecture  is  quoted  merely  as  an  answer  to  those  who  find 
mechanical  difficulties  in  the  way  of  a  more  unified  administra- 
tion of  all  the  industries  of  a  nation,  as  one  factory,  so  great 
as  to  countervail  all  possible  gains.  These  timid  ones  need  to 
learn  that,  when  new  policies  have  been  planned  upon  the  right 
principle,  mechanical  difficulties  have  always  proven  subservient 
thereto — as  was  true  in  this  case  of  more  modest  consolidations. 
The  world's  progress  has  been  accomplished  by  those  who  have 
dared  to  believe  this  general  law. 

The  real  reason  why  some  large  consolidations  have  failed 
to  be  profitable  and  permanent,  in  the  past,  is  that  after  some 
sixty  per  cent  or  so  of  an  industry  has  become  consolidated  it 
proves  so  profitable  to  outsiders  to  create  new  enterprises  in 
the  same  line,  just  for  the  purpose  of  selling  them  out  to  "the 
trust/'  that  no  larger  percentage  of  monopoly  can  ever  be  ac- 
complished. Thereafter  the  creation  of  new  businesses  to  be 
absorbed  proceeds  as  rapidly  as  the  consolidation — a  process  not 
profitable  to  the  consolidation,  nor  to  the  country  as  a  whole. 

But  our  chief  interest  here  concerns  not  the  mechanical  diffi- 
culties of  administration,  but  with  the  far  more  basic  diffi- 
culty of  comprehending  whence  might  come  these  gigantic  sums, 
apparently  of  real  dollars,  which  figured  in  the  capitalizations 
of  these  novel  consolidations,  or  "trusts."  In  1901,  indeed, 
this  aspect  of  the  marvelous  new  policy  became  a  public  theme. 
The  ablest  minds  in  the  commercial  world  were  called  upon 
for  explanations.  They  responded,  as  we  now  can  see,  not 
with  real  explanations — because  they  either  did  not  realize 
themselves  what  was  going  on,  or  they  hated  to  give  the  game 
away — but  with  excuses  and  palliations  which  never  approached 
the  real  essence  of  the  situation. 

Thus,  the  North  American  Review  for  May,  1901,  published 
a  symposium  upon  this  topic  by  six  leading  commercialists 
which  should  descend  into  history  as  a  record  of  the  state  of 
mind  regarding  the  current  financial  evolution  of  that  day. 


CREDIT  103 

The  six  contributors  were  Russell  Sage,  the  Wall-street  finan- 
cier; James  J.  Hill,  the  railroad-president  and  "Builder  of  the 
Northwest";  Charles  M.  Schwab,  the  steel-man;  Charles  E. 
Flint,  merchant,  banker  and  member  of  the  Conference  of 
American  Republics;  James  Logan,  the  New  England  manu- 
facturer, and  F.  B.  Thurber.  Mr.  Sage's  article  opens  the  attack 
by  saying: 

"It  is,  perhaps,  ungracious  to  sound  a  harsh  note  in  a 
company  so  happy  and  well  content  as  we  are  to-day  in  Wall 
street.  My  excuse  must  be  that  I  honestly  believe  that  we 
are  liable  to  lose  our  heads;  that  we  have  entered  upon  busi- 
ness methods  that  may  lead  us  to  the  brink  of  disaster,  if, 
indeed,  they  do  not  land  us  over  the  brink.  On  the  other 
hand,  these  business  methods  have  been  inaugurated,  and 
are  vouched  for,  by  a  company  of  men  who  have  never  known 
failure,  and  who  may  succeed  in  steering  us  safely  over  what 
appears  to  my  old-fashioned  eyes  a  very  treacherous  deep. 

"It  is  certain  that  under  the  direction  of  these  men  stocks 
are  booming.  Sales  are  making  at  a  rate  unprecedented  in 
the  financial  history  of  the  world.  Everybody  is  making 
money.  Millionaires  are  created  almost  over  night.  .  .  .  The 
consolidations  of  to-day  begin  at  the  very  outset  with  capi- 
talizations that  cast  all  past  experience  into  the  shade,  and 
that  almost  stagger  the  imagination.  The  steel  combination 
is  to  start  off  with  a  capitalization  of  one  billion  dollars. 
[It  actually  did  start  with  a  tenth  more  than  this.]  That 
is  more  than  one-half  the  national  debt.  It  is  one-seventh 
of  the  entire  wealth  of  the  United  States.  The  total  money 
in  circulation  in  the  United  States  ...  is  $2,113,294,983. 
This  company's  issue  of  securities  will  represent  practically 
one-half  of  the  entire  volume  of  money  in  the  United  States. 

"To  me  there  seems  to  be  something  very  much  like  sleight- 
of-hand  in  the  way  in  which  these  industries  are  doubling 
up  in  value,  as  at  the  touch  of  a  magician's  wand.  Here 
we  have  a  factory — a  good,  conservative,  productive  investment 
— turning  out  anything  from  toys  to  locomotives.  It  falls 
into  the  hands  of  the  consolidates,  and,  whereas  it  was 
worth  $50,000  yesterday,  to-day  it  is  worth  $150,000— at 
least,  on  paper.  Stocks  are  issued;  bonds  are  put  out;  loans 
are  solicited  with  these  stocks  as  security.  The  man  who 
owned  the  factory  probably  could  not  have  borrowed  $10,000 
on  it.  Now,  however,  .  .  .  bankers  and  financiers  are  asked 
to  advance  $60,000  or  $70,000  on  what  is  practically  the  same 


104  MODERN   ECONOMIC  TENDENCIES 

property.  .  .  .  Under  these  circumstances  a  'squeeze'  seems 
to  me  inevitable.  ...  In  fact,  we  have  gotten  away  entirely 
from  the  old  idea  of  making  the  money  of  the  country  the 
basis  of  our  trading.  Instead,  there  is  thrown  into  the  busi- 
ness-world, to  be  used  as  a  trading  medium,  millions  upon 
millions  of  new  stocks  the  real  value  of  which  is  yet  to  be 
determined.  As  soon  as  this  is  thoroughly  realized  we  may 
look  for  trouble." 

Yet  not  until  1907  did  Mr.  Sage's  predictions  of  catastrophe 
bear  even  partial  fruit,  and  not  even  yet  has  the  disaster  pene- 
trated to  the  point  of  quelling  this  ever-bubbling  fountain  of 
fresh  interest-bearing  securities.  Barring  temporary  ups  and 
downs,  inflation  is  proceeding  to-day  faster  than  ever  before. 
Throughout  the  winter  of  1914-15  it  was  checked  by  the  stress 
originating  in  the  European  war,  it  is  true,  but  by  spring  it 
had  revived  under  the  stimulus  of  orders  for  war-munitions 
and  to-day  is  proceeding  more  rapidly  than  ever. 

Some  instances  of  this  most  recent  expansion  have  already 
been  quoted.  Even  as  early  as  August,  1915,  comes  word  of 
the  appearance  of  a  new  company  with  a  maximum  capitaliza- 
tion of  ten  millions,  issuing  eight  hundred  thousand  shares  of 
stock  without  face-value  stated!  With  such  an  act  the  last 
vestige  of  pretense  that  stock  represents  actual  value  invested 
has  been  abandoned. 

Within  a  single  year  the  shares  of  a  preceding  company, 
now  merged  into  this  new  one,  sold  first  at  $20  and  then, 
after  the  merger,  at  $420 !  Yet  it  seems  strangely  difficult  for 
the  ordinary  mind  to  grasp  the  fact  that  $400  out  of  this  $420 
has  been  contributed  solely  by  the  public  which  purchases,  not 
the  stock,  but  any  and  every  article  of  food,  clothing  or  the  like 
which  is  on  sale. 

And  if  the  final  $400  obviously  came  into  the  possession  of 
the  capitalist  in  this  way,  is  it  such  a  radical  or  revolutionary 
or  crazy  thing  for  the  public  to  inquire,  very  sternly,  if  the 
original  $20  may  not  have  arisen  in  the  same  way? 

Nor  is  the  $420  at  all  likely  to  be  the  end  of  the  story.  This 
paper  can  be  given  any  larger  valuation  imaginable,  merely  by 
permitting  the  corporation  to  charge  prices  which  will  pay 
dividends  upon  that  sum.  And  if  the  rate  of  dividends  becomes 
so  high  that  the  public  becomes  restive,  it  can  be  reduced  at 
any  time,  as  a  rate,  while  keeping  it  undiminished  in  aggregate 


CREDIT  105 

volume — or  even  increased — merely  by  refunding  the  obligations 
of  the  corporation  in  larger  face-value,  and  distributing  the 
surplus  to  the  stockholders  as  a  "melon."  It  is  so  easy  that 
financiers  are  becoming  almost  ashamed  of  it,  not  because  of 
its  outrageous  inequity,  but  because  of  its  childish  simplicity. 

Valuations  of  Commercial  Principal  Dependent  Solely 
upon  Income. — If  there  be  any  fact  which  projects  from  the 
financial  world  so  prominently  that  no  man  might  be  expected  to 
miss  stumbling  over  it,  it  is  the  law — which  has  already  been  stated 
once,  but  which  cannot  be  repeated  and  emphasized  too  often — 
that  interest-payments  and  profits  determine  principal-valua- 
tions, and  not  valuations  interest-rates.  Yet  day  after  day,  and 
year  after  year,  in  debating  these  questions,  men  supposedly  in- 
telligent and  experienced  in  finance  trot  out  the  ancient  super- 
stition that  interest  must  be  paid  at  a  certain  rate,  because  of 
the  "value"  of  the  principal  "invested." 

Yet  there  is  not  the  slightest  foundation  in  fact  for  that 
idea.  It  is  pure  superstition.  The  valuation  of  the  investment 
depends  wholly  upon  what  it  happens  to  earn  in  the  future — 
perhaps  less,  but  usually  more,  than  when  invested.  That  fact 
is  fully  considered  by  every  commercial  investor  before  in- 
vesting.4 

Thus,  regarding  Mr.  Sage's  paper,  the  Outlook  for  June  1, 
1901,  says: 

"Mr.  Sage's  article  furnished  the  text  for  five  replies  in 
defense  of  the  trusts,  yet  not  one  of  the  defenders  takes  ex- 
ception to  Mr.  Sage's  figures  as  typical  of  the  way  trusts  are 
capitalized.  The  uniform  reply  to  his  criticism  is  that  the 
value  of  the  property  is  not  to  be  reckoned  by  its  cost,  but  by 
its  earning -capacity."  (Italics  mine.) 

The  orthodox  authorities  in  political  economy  seem  to  see 
plainly  enough  the  economic  fact.  It  is  strange  that  they 
cannot  grasp  the  far-reaching  ethical  conclusions  enforced 
thereby. 

Of  the  five  replies  to  Mr.  Sage  only  one  seems  to  offer  any- 

4  The  important  question  of  the  nature  of  interest,  and  the  laws 
which  determine  interest-rates,  will  be  pursued  at  length  In  later 
chapters. 


106  MODERN   ECONOMIC  TENDENCIES 

thing  pertinent,  and  this  supports  our  own  contentions  as  to 
the  nature  of  interest  and  dividends.    Mr.  Flint  says: 

"As  a  test  of  what  is  really  behind  the  industrial  stocks 
...  I  have  gone  into  the  figures  of  forty-seven  among 
the  most  prominent  companies.  These  were  selected  at 
random.  .  .  .  The  greatest  industrial  of  all,  Standard  Oil, 
which  last  year  paid  48  per  cent  on  the  par  value  of  its 
stock,  is  purposely  not  included  in  the  list.  Nor  need  it  be 
included,  for  without  it  we  arrive  at  an  average  that  will, 
I  believe,  astonish  many  even  among  those  who  have  been 
most  active  in  handling  these  stocks.  ...  He  will  find  that 
the  industrials,  almost  without  exception,  are  worth  a  great 
deal  more,  judged  by  their  earning -capacity,  than  they  are 
selling  for  in  the  open  market.  Some  are  earning  over  25 
per  cent  a  year  on  their  market-values,  and  the  average  for 
the  entire  forty-seven  is  13.6  per  cent.  ...  A  very  popular 
impression  exists  that  industrials  are  composed  principally 
of  water.  The  best  answer  to  this  is  that  forty-seven  companies 
show  an  average  earning-rate  of  7.44  per  cent  on  their  total 
capitalization  at  par."  (Italics  mine.) 

This,  it  seems,  was  the  equivalent  of  13.6  per  cent  on  their 
market-valuation.  If  Mr.  Flint  and  the  Ultimate  Consumer 
are  to  agree,  a  new  definition  of  stock-water  must  be  developed. 
There  could  be  no  finer  proof  of  water  than  that  furnished  by 
these  figures.  Nor  could  there  be  finer  support  for  our  later 
contention  that,  averaging  all  together,  costs  of  replacement, 
capitalizations  and  earnings  must  always  hang  closely  together, 
automatically,  regardless  of  the  source  of  the  investment.5 

Yet  from  the  start  inflation  worked  successfully,  and  Mr. 
Sage's  gloomy  predictions  were  discredited  by  experience.  The 
public  has  become  accustomed  to  the  magical  growth  of  riches, 
and  the  topic  is  being  neglected — until  post-war  developments 
of  a  similar  nature,  but  surpassing  these  earlier  figures  in  scale 
as  the  Great  War  surpasses  the  Cuban  War,  shall  have  forced 
them  again  to  the  front. 

The  younger  financiers  who  astonished  the  more  experienced 
ones  of  1901  were  not  necromancers,  but  merely  shrewd.  Ac- 
cording to  Mr.  Frick,  in  court-testimony  as  reported  in  the 

8  The  proof  of  this  law  will  be  found  in  the  chapters  upon  Interest. 


CREDIT  107 

Literary  Digest  for  Feb.  24,  1900,  as  to  the  Carnegie  Steel 
Company : 

"The  business  from  1892  to  1900  was  enormously  profit- 
able, growing  by  leaps  and  jumps  from  year  to  year  until, 
in  1899,  the  firm  actually  made  on  low-priced  contracts  in 
net  profits,  after  paying  expenses  of  all  kinds,  $21,000,000. 
In  November,  1899,  Carnegie  estimated  the  net  profits  for 
1900  at  $40,000,000,  and  Frick  then  estimated  them  at 
$42,500,000.  Carnegie  valued  the  entire  property  at  over 
$250,000,000  and  avowed  his  ability  in  ordinarily  prosperous 
times  to  sell  it  on  the  London  market  for  $500,000,000." 

During  1901  the  profits  actually  were  at  the  rate  of  over  one 
hundred  millions  per  annum.  The  Literary  Digest  for  Dec.  7, 
1901,  quotes  the  New  York  Journal  of  Commerce  as  saying: 

"Checks  were  sent  on  Wednesday  to  members  of  the  under- 
writing syndicate  of  the  United  States  Steel  Corporation 
amounting  to  one-eighth  of  their  nominal  subscriptions,  or 
to  $25,000,000  in  the  aggregate,  the  syndicate  being  for  the 
nominal  sum  of  $200,000,000.  As  only  one-eighth  of  this 
amount  was  called,  however,  .  .  .  the  current  dividend  or  dis- 
tribution by  the  managers  of  the  syndicate  is  practically  the 
return  of  the  entire  amount  actually  paid  in.  In  addition  to 
this  payment  it  is  learned  on  reliable  authority  that  the 
profits  of  the  syndicate  are  largely  in  excess  of  the  amount 
actually  paid  in.  .  .  .  these  profits  were  estimated  at  about 
261/2%,  or  say  $53,000,000.  It  is  now  estimated,  however, 
that  these  profits  may  equal  or  exceed  30%,  or  $60,000,000. 
This  would  be  considerably  over  200%  on  the  investment." 
(Italics  mine.) 

And  on  June  28,  1902,  the  same  source  of  information  states: 

"The  true  capitalizations  of  all  the  consolidations  effected 
within  the  last  twelve  years  is  reckoned  by  this  authority  at 
about  $4,500,000,000,  while  the  increase  of  large  and  small 
independent  corporations  in  the  last  seventeen  months  is 
reckoned  at  $5,000,000,000." 

These  figures  agree  well  with  independent  estimates  as  to  the 
current  rate  of  output  of  new  securities  at  that  time  as  at 
least  one  hundred  millions  per  month,  and  as  fully  three  times 
that  rate  now. 


108  MODERN   ECONOMIC  TENDENCIES 

But  what  concerns  us  here  is  the  fact  that  even  fifteen  years 
ago  the  evidence  was  not  only  ample — it  was  overwhelming — 
that  there  lies  not  the  slightest  shadow  of  connection  between 
capitalizations,  or  interest-rates,  and  actual  investment  in  ap- 
pliances. For  here,  in  at  least  this  one  instance,  after  the  in- 
vestors had  been  repaid  their  entire  original  investment  in  a 
single  payment — after  a  delay  quite  insufficient  for  productivity 
to  be  a  factor  in  the  earnings — and  with  200  per  cent  of  profits 
on  top  of  that,  the  world  of  Ultimate  Consumers  still  owed 
them  every  dollar  of  that  original  indebtedness,  and  soon  more! 

That  the  expectations  of  the  founders  of  the  Steel  Corpora- 
tion were  not  visionary  may  be  judged  from  the  fact  that  its 
net  earnings  during  three  recent  years,  in  round  numbers, 
have  run  as  follows:  In  1914  $80,000,000,  in  1915  $105- 
500,000,  and  in  1916  $114,000,000,  with  every  prospect  of  a 
still  more  prosperous  year  in  1917.  According  to  Mr.  Carnegie's 
most  conservative  estimate  of  the  proportion  of  the  valuation 
of  the  property  to  its  net  earnings  the  Steel  Corporation  was 
worth  in  1914  $500,000,000,  in  1915  $660,000,000  and  in  1916 
$715,000,000,  and  perhaps  twice  these  figures ! 8 

These  are  the  gigantic  sums  which  the  Ultimate  Consumers 
still  owe  these  "investors"  in  this  merger  and  upon  which  they 
must  pay  interest  to  these  people  and  their  posterity  indefinitely 
in  the  future.  Yet  they  "invested"  only  $25,000,000  in  the 
first  place — with  no  probability  that  they  did  even  that,  in  value 
produced  by  themselves — which  sum  was  repaid  to  them  in 
full  during  the  first  year! 

Yet  even  if  the  Ultimate  Consumers  should  now  offer  these 
people  the  $715,000,000  in  cash  for  this  property,  the  whole 
value  of  which  has  been  created  by  the  purchases  of  the  public, 
in  order  to  preclude  paying  further  interest  thereon  indefinitely 

•The  Times  for.  July  31,  1918,  reports  that  the  net  earnings  of  the 
U.  S.  Steel  Corporation  for  the  second  quarter  of  1918  were  $153,273,641, 
or  at  the  rate  of  over  $600,000,000  per  annum.  Out  of  this  quarterly 
sum  over  $90,000,000  were  set  aside  as  war-taxes.  According  to  Mr. 
Carnegie's  figures  the  Corporation  is  now  worth  at  least  $1,500,000,000 
on  the  basis  of  its  net  earnings,  accepting  the  war-tax;  or,  if  it  be 
assumed  that  the  Corporation  is  capable  of  the  same  earnings  after  the 
war-taxes  shall  have  been  remitted,  it  will  then  have  become  worth 
about  $3,800,000,000.  Such  is  the  latent  possibility  which  was  not 
understood  by  Mr.  Eussell  Sage,  but  which  was  partly  grasped  by  the 
younger  men  of  his  day. 


CREDIT  109 

in  the  future,  the  attempt  would  be  futile.  These  people  would 
probably  not  accept.  They  do  not  wish  the  debt  canceled. 
It  is  too  profitable. 

Moreover,  even  if  they  accepted  the  offer  it  would  not  relieve 
the  Consumer  one  whit.  For  this  seven  hundred  millions  is 
now  money.  It  is  sacred  "property."  Its  owners  possess  not 
only  the  right  to  invest  it  in  other  industrial  enterprises, 
thereby  collecting  from  the  Consumer  the  same  interest-tax 
through  other  channels  than  steel,  but  any  attempt  on  the  part 
of  the  public  to  restrict  this  opportunity  for  investment,  or 
collection  of  tribute  thereon,  is  immediately  denounced  by  our 
most  ponderous  authorities  upon  the  law  as  a  confiscation  of 
property. 

Yet  it  is  obviously  property  which  its  owners  never  created; 
and  upon  it,  even  if  they  did  create  it,  they  have  no  right  to 
collect  interest  without  the  request,  or  at  least  the  consent,  of 
him  who  pays  it — the  Ultimate  Consumer. 

Confiscation. — Confiscation  of  property  without  due  process 
of  law  steps  right  through  the  middle  of  the  Constitution  of 
the  United  States.  Therefore  we  approach  a  most  interesting 
crisis,  when  once  the  growing  issue  shall  have  come  to  a  head 
as  to  whose  property  it  is  which  has  been  confiscated.  For 
every  least  inflation  of  the  market-valuation  of  any  security  con- 
stitutes a  confiscation  of  the  property  of  the  Ultimate  Con- 
sumer, without  the  ghost  of  any  process  of  law,  or  of  any  equity 
upon  which  to  base  one. 

Yet  the  Consumer's  property  is  certainly  just  as  sacred  as 
is  that  of  the  promoter  or  capitalist,  and  perhaps  far  more  so. 
Do  the  commercialists  really  dare  to  let  come  to  a  head  the 
issue  as  to  which  form  of  property  is  the  more  sacred? 

Our  Accumulation  of  Interest-bearing  Securities. — To-day 
the  bank,  originally  solely  a  place  of  deposit  for  coin  or  bullion, 
has  become,  with  its  outlying  tentacles  of  brokers  and  promoters, 
the  natural  habitat  of  our  national  fund  of  credit.  The  primal 
form  of  commercial  credit-instrument  is  the  bond  or  stock- 
certificate.  All  other  forms  are  subsidiary  to  these. 

The  approximate  growth  of  our  aggregation  of  stocks,  bonds, 
etc.,  will  be  shown  statistically  in  Table  42.  These  figures  are 
here  exhibited  in  graphical  form,  in  Curve  2  of  Fig.  1.  The 
growth  of  banking-institutions,  measured  in  various  ways,  ap- 
pears in  Tables  8  and  9. 


110 


MODERN   ECONOMIC  TENDENCIES 


The  data  appearing  in  Tables  8  and  9  are  derived  chiefly 
from  the  United  States  Statistical  Abstract.  There  appears  to 
be  a  lack  of  agreement  as  to  figures  as  to  the  state  banks. 
Barnet,  in  his  "Growth  of  State  Banking,"  publishes  the  num- 
ber of  such  banks  for  each  year  from  1877  to  1899  as  stated  by 
the  comptroller  of  the  currency,  and  also  as  he  believes  the 
correct  facts  to  be,  in  comparison.  At  the  worst  point  there 


iSVo  l85o          1660  l8j-0  1880  1990  1500          1510  l<)ftO 

Fig.  1.— Rate  of  Growth  of  Interest-bearing  Securities  per  Capita. 

is  a  discrepancy  between  the  two  of  over  seventy  per  cent.  As 
late  as  1886  it  amounts  to  forty- three  per  cent. 

The  state  banks  passed  through  a  checkered  career  in  their 
earlier  decades,  and  even  after  the  establishment  of  the  na- 
tional banks  they  were  reduced  to  unity  of  system  only  gradu- 
ally. For  these  reasons  data  as  to  state  banks  are  largely 
omitted  from  Table  9. 

From  the  columns  of  the  tables  there  stand  out  the  following 
obvious  and  significant  facts: 

(1)   During  the  period  since  the  Civil  War  the  credit  ex- 


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tended  by  the  United  States  government  per  capita  has  markedly 
decreased — at  least,  down  to  about  ten  years  ago.  Since  then 
it  has  remained  virtually  constant  at  about  $10  per  head. 

(2)  Bank-clearings    per    capita    apparently    decreased    until 
about  1895,  at  which  time  they  reversed  their  tendencies.    Since 
then  they  have  more  than  doubled.    It  is  since  about  1895  that 
the  rise  in  prices  and  wages  has  presented  such  a  problem  to 
economists  and  housewives. 

(3)  Bank-capital  per  capita  has  remained  virtually  constant 
ever   since   1865   at   about   $10,   varying  less   than   any   other 
quantity  listed. 

(4)  The  number  of  banks  per  capita  shows  not  the  slightest 
sign  of  any  concentration  of  banking-facilities  into  a  "money- 
trust,"  but  rather  the  marked  opposite.    While  single  banks  of 
the  larger  class  have  undoubtedly  grown  enormously  in  size,  yet 
the  number  of  banks  per  person  has  more  than  doubled  within 
twenty  years.    This  is  true  of  all  sorts  of  banks,  although  they 
differ  in  rate  of  growth,  the  loan  and  trust  companies  leading. 

In  this  respect  the  banks  appear  merely  to  have  followed  the 
example  set  by  the  cities  as  to  population :  the  big  cities  growing 
enormously,  but  the  population  still  divided  about  evenly  among 
the  several  sizes  of  community,  and  the  smallest  hamlets  having 
increased  tremendously  in  number.  The  same  thing  is  true 
of  manufacturing  enterprises.  Chapters  XV  and  XVIII  give 
full  information  as  to  these  topics. 

(5)  Aggregate  deposits  per  capita  have  increased  enormously. 
In   the   national   and    savings-banks,    deposits-per-citizen   have 
multiplied  by  over  sixfold  in  the  last  fifty  years,  and  in  all 
banks  together  by  about  fourfold  in  the  last  forty  years. 

(6)  The  resources  of  the  banks  have  also  grown  enormously 
per  capita.     Those  of  the  national  and  savings  banks  alone 
have  more  than  doubled  within  twenty  years.     Including  the 
loan  and  trust  companies,  which  have  grown  the  most  rapidly, 
and  the  building-associations,  which  have  been  the  most  slug- 
gish, the  increase  has  been  about  120  per  cent  since  the  Spanish 
War,   even   if   the   comparison  be   stopped   just   short   of   the 
tremendous  expansion  in  1916  due  to  the  Great  European  War. 

(7)  But  the  most  phenomenal  expansion   of  all  manifests 
itself  in  the  swelling  volume  of  "surplus  and  undivided  profits." 
This  aggregate  banJc-surplus  per  capita  has  grown  by  nearly 
sevenfold  during  the  last  half-century,  being  paralleled  in  growth 


114  MODERN   ECONOMIC   TENDENCIES 

only  by  the  deposits.  These  last  are  the  legal  as  well  as  the 
equitable  property  of  those  outside  the  bank.  Both  have  more 
than  doubled  since  the  opening  of  the  present  century. 

(8)  The  most  instructive  feature  of  the  tables  is  the  four 
columns  of  "ratios"  in  Table  8.  Loans  and  discounts,  which 
form  the  one  item  of  closest  relationship  to  the  problem  of  the 
volume  of  credit,  have  virtually  doubled  relatively  to  the  money 
in  circulation  during  the  fifty  years,  although  some  even  of 
this  basis  of  reference  is  itself  credit-instrument.  On  the  other 
hand,  their  proportions  to  the  "surplus  and  undivided  profits" 
and  to  deposits,  whether  those  in  national,  savings  or  all  banks 
together,  have  remained  virtually  constant. 

The  doctrine  that  loans  and  discounts — which  constitute  one 
of  the  larger  items  in  that  credit-circulating-medium  upon  which 
depend  all  production,  employment,  interchange  and  consump- 
tion, amounting  now  to  twice  the  money  in  circulation — rest 
squarely  upon  and  consist  merely  of  the  credit  supplied  by  the 
people,  either  in  the  form  of  deposits  or  notes,  could  not  be 
proven  more  conclusively  than  by  these  columns  of  ratios,  which 
remain  constant  over  several  decades,  during  the  widest  range 
in  conditions:  war  or  peace,  panic  or  prosperity,  political 
changes  and  what  not.  Yet  upon  all  this  volume  of  credit  the 
banks  demand  interest — and  get  it — on  the  grounds  that  they 
have  "supplied"  the  capital !  9 

Insurance. — A  similar  display  of  the  growth  of  insurance  per 
capita,  as  a  factor  in  the  country's  volume  of  credit  which  is 
second  only  to  securities  and  to  "commercial  paper"  or  notes, 
appears  in  Table  10.  These  figures  are  also  drawn  largely  from 
the  U.  S.  Statistical  Abstract,  wherein  most  of  them  are  credited 
to  Dr.  I.  M.  Eubinow,  Insurance  Statistician. 

The  columns  in  Table  10  under  "Insurance  in  Force"  which 
are  labeled  "computed"  do  not  pretend  actually  to  measure  in- 
surance in  force,  but  merely  a  capacity  for  serving  as  credit- 
instruments  which  is  assumedly  measurable  in  parallel  with 
the  insurance  actually  in  force,  relatively  to  payments,  in  those 
lines  where  data  are  available  as  to  this  item.  That  is,  they 

6  The  "stupendous  growth"  of  banking-credits  in  the  United  States 
was  revealed  by  the  report  of  the  Controller  of  the  Currency  for  January  1, 
1920.  During  the  twenty  years  since  September,  1899,  the  resources  of 
the  national  banks  alone  have  swollen  to  334  per  cent  of  what  they  were 
per  capita  at  that  comparatively  recent  period,  amounting  now  to  over 
$224,  on  the  average,  for  every  man,  woman  and  child  in  the  country. 


CREDIT 


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are  based  really  upon  payments,  but  reduced  to  terms  of  com- 
parison with  actual  insurance  in  force. 

Briefly,  the  showing  as  to  insurance  is  even  more  striking 
than  that  of  banking.  However  the  volume  may  be  measured, 
it  has  plainly  doubled  in  volume  per  capita  since  the  century 
opened.  There  is  no  phase  of  our  marvelously  expanding  com- 
mercialism which  is  growing  more  rapidly  than  that  attached 
to  insurance.  Large  insurance-policies,  as  a  most  approved 
means  for  making  large  fortunes  hereditary  without  the  pay- 
ment of  an  inheritance-tax,  are  daily  becoming  more  popular 
as  a  form  of  investment. 

Commercial  versus  Natural  Insurance. — In  arguing  that  this 
rapidly  swelling  aggregate  volume  of  credit-instruments  con- 
stitutes a  dangerous  burden  upon  the  stability  of  our  civiliza- 
tion, as  will  be  done  later,  there  must  be  no  misunderstanding 
of  this  as  an  argument  against  real  insurance,  as  contrasted 
with  commercial  insurance.  Real  insurance,  in  its  essence,  is 
a  very  simple  and  useful  thing.  Its  sole  function  is  to  dis- 
tribute harmlessly  over  many  people  the  burdens  due  to  be- 
reavement, fire,  accident,  etc.,  which  would  otherwise  fall  upon 
the  individual  with  an  intensity  stunting  to  his  own  life  and 
unprofitable  to  society. 

Viewed  from  any  factory-system  standpoint,  this  function  in- 
volves merely  the  clerical  activities  of  recording  the  risks, 
measuring  the  losses,  and  distributing  the  assessments.  It  in- 
volves no  appreciable  financial  questions  whatever. 

The  author  knows  well  that,  under  existing  commercial  condi- 
tions, insurance  by  assessment-society  has  failed  to  protect.  The 
private  assessment-societies  failed  for  two  reasons.  First,  they 
could  not  get  the  business,  in  competition  with  the  drummer- 
equipped  commercial  companies.  Secondly,  they  could  not  stay 
solvent.  Under  commercial  standards  of  money-making  every- 
where, it  was  inevitable  that  risks  should  be  assumed  faster 
than  a  proper  fund  was  maintained  for  their  liquidation.  Money 
appeared  to  be  coming  in  rapidly,  and  was  therefore  distributed 
and  spent  when  it  should  have  been  conserved,  to  the  ultimate 
bankruptcy  of  the  enterprise.  But  this  was  only  because  it 
was  not  insurance,  but  the  private  profit  of  the  society-members, 
which  was  the  accredited  aim. 

Success  may  be  had  for  assessment-societies  only  when  (a) 
every  citizen  is  forcibly  included  and  insured,  not  because  he 


118  MODERN   ECONOMIC   TENDENCIES 

necessarily  desires  it  but  because  society  needs  to  have  him 
insured;  and  (b)  all  commercial  features,  such  as  stock-holders, 
dividends  and  banking,  are  excluded.  Such  a  form  of  insurance, 
chiefly  against  want  in  old  age,  is  in  successful  operation  in 
most  civilized  lands  foreign  to  the  United  States.  Such  a  system 
is  just  what  every  businessman  would  design,  if  he  were  once 
placed  in  supreme  command  of  all  insurance  in  the  country, 
having  no  competition  to  meet  anywhere  and  sworn  to  keep 
his  administration  unsullied  by  a  single  dollar's  worth  of  profits 
or  dividends. 

For  such  a  national  commissioner  of  insurance  would  be 
troubled  by  no  responsibility  for  finding  business,  nor  for  find- 
ing capital,  nor  for  paying  dividends.  He  would  be  responsible 
only  for  seeing  that  no  person  in  the  land  might  die,  nor  any 
building  burn,  nor  any  ship  sink,  that  the  burden  due  to  the 
event  were  not  distributed  over  society  as  evenly  as  statistics 
and  a  sense  of  patriotic  duty  can  do  such  a  thing. 

The  worst  risks  would  be  his  first  duty.  Quite  aside  from 
all  the  inefficiencies  of  commercial  insurance  which  are  visible 
in  its  price  (which  it  possesses  in  common  with  all  other  com- 
mercial enterprises)  the  prime  failure  of  commercial  insurance 
is  its  inefficiency  in  insuring.  For  it  fails  completely  to  insure 
the  very  person  or  things  which  society  most  needs  to  have 
insured,  namely,  the  worst  risks. 

For  competitive  commercial  insurance  cannot  afford  to  assume 
any  risk  which  will  not  pay  a  dividend.  Consequently  the  first 
precaution  is  to  exclude  all  those  unusually  liable  to  disaster. 
Thus  commercial  considerations  restrict  our  volume  of  insurance 
below  its  proper  normal  just  as  (as  will  be  shown  later)  they 
restrict  our  natural  volumes  of  production,  trade  and  esthetic 
enjoyment. 

Yet  these  worst  risks  are  just  the  ones  which  should  be 
brought  in  first.  For  society  is  interested  wholly  in  the  in- 
surance, and  not  all  in  the  dividend.  Thus  the  real  basis  for 
life-insurance  is  that  society  cannot  afford  to  have  any  family 
of  children  grow  up  in  poverty  and  ignorance.  It  cannot  afford 
even  to  be  brutalized  by  the  sight  of  a  widow  toiling  as  in  a 
penitentiary,  and  no  better  cared  for  than  a  convict,  when  her 
only  crime  has  been  to  lose  her  husband. 

Therefore  it  is  the  family  of  the  man  sure  to  die  soon  which 


CREDIT  119 

society  should  insure  before  all  others.  Yet  it  is  just  this  sort 
of  family  which  commercial  insurance  never  insures. 

This  basic  failure  of  insurance  when  distorted  by  commer- 
cialism has  not  been  included  in  any  of  our  later  statistical 
estimates  of  the  current  waste  of  life  by  commercialism.  Yet 
it  is  a  gigantic  and  immeasurable  loss  to  the  community  each 
year.  Even  in  a  cold-blooded,  pecuniary  way  it  is  a  tremendous 
loss,  for  three-quarters  of  our  prison  and  reformatory  facilities 
are  required  by  men  under  twenty-five ;  and  much  of  their  error 
is  traceable  directly  to  accidental  poverty  of  opportunity  dur- 
ing childhood  and  youth. 

In  addition  comes  the  far  greater,  if  potential,  loss  of  what 
these  boys  and  girls  might  have  done  during  life,  if  they  had 
had  proper  education  of  their  faculties.  From  their  deficiencies 
every  person  in  the  land'  suffers,  in  general  standards  of  com- 
munity-life or  in  direct  disaster — if  in  no  other  way,  in  the 
decreasing  purchasing-power  of  the  dollar. 

Yet  all  that  is  needed  in  order  to  remove  this  social  defect 
is  to  eliminate  the  ownership  from  insurance,  recognizing  it 
as  a  function  as  essential  to  society  as  is  that  of  the  Supreme 
Court,  place  everyone  involved  upon  a  salary,  include  all  in- 
surance as  a  government-monopoly,  and  then  let  premiums 
merely  balance  losses,  plus  surplus.  In  one  form  or  another 
most  countries  now  maintain  a  system  more  or  less  approach- 
ing this  plan.  But  the  motto  of  America  is:  Free  license  to 
commercial  anarchy,  else  our  liberties  are  invaded ! 

Credit-bases. — Returning  to  the  question  of  volume  of  credit, 
it  must  be  understood  that  the  most  accurate  statistics  as  to  banks, 
insurance,  etc.,  can  give  only  a  rough  measure  of  the  aggregate 
credit  extended  thereby.  There  is  no  one  set  of  items  which 
is  used  exclusively  or  wholly  as  credit-instruments.  Any  paper 
representing  any  of  these  phases  of  banking  or  insurance  may 
be  made  the  basis  for  a  transfer  of  credit.  Some  is  merely 
more  convenient  than  others. 

Again,  the  price  which  each  will  bring  is  also  varying  con- 
stantly. During  the  period  from  1907  to  1914,  for  instance, 
the  average  price  of  securities  in  Wall  street  fell  some  forty 
per  cent,  involving  an  apparent  shrinkage  of  credit  of  tens 
of  billions.  Yet  so  great  was  the  issue  of  new  securities  during 
these  seven  years  that  the  net  shrinkage  amounted  to  only 
about  thirteen  per  cent,  or  five  or  six  billions  of  dollars. 


120  MODERN   ECONOMIC  TENDENCIES 

The  effect  of  even  such  an  item  as  this  scarcely  shows  in 
the  tables.  Nevertheless  the  data  as  to  nominal  issues  and 
values  are  the  only  possible  means  toward  a  more  accurate 
estimate  of  the  volume  of  credit.  Taken  in  conjunction  with 
the  recovery  of  prices  of  1914-16  they  show  a  tremendous,  if 
not  a  steady,  expansion  in  credit  per  capita  since  1907.  This 
is  especially  true  of  the  longer  period  since  1898. 

The  collection  of  data  as  to  aggregate  bases  for  the  issue  of 
credit-instruments  must  also  include  some  estimate  of  the 
volume  of  commercial  paper  put  forth,  in  addition  to  that 
indicated  by  Tables  8,  9  and  10.  Commercial  paper,  using  the 
term  in  its  broadest  sense  to  include  mortgages,  etc.,  is  based 
upon: 

(1)  Static  wealth  in  general,  such  as  land,  buildings,  etc.; 
it  is  this  class  of  wealth  which  is  undergoing  the  most  rapid 
expansion  of  all,  as  these  pages  go  to  press — not  through  new 
construction,  but  from  the  exact  opposite — the  increased  de- 
mand for  buildings  due  to  a  temporary  cessation  of  construc- 
tion, coupled  with  increasing  pressure  of  population  towards 
congestion  in  cities ; 

(2)  Floating  wealth,  consisting  of  the  interchange  of  com- 
modities in  an  unfinished  condition,  indicated  by  bank-clearings ; 

(3)  Bills  of  exchange  and  warehouse-receipts,  based  upon  ex- 
change of  commodities  with  foreign  lands,  indicated  by  exports 
and  imports;  and 

(4)  Retail  trade,  based  upon  the  sale  of  finished  commodities 
to  the  Ultimate  Consumer. 

If  any  doubt  should  exist  as  to  the  propriety,  from  the  com- 
mercial! st's  side  of  the  argument,  of  including  all  these  items, 
the  following  quotation  from  an  address  delivered  before  the 
New  Jersey  Bankers  Association  on  May  3,  1912,  by  Mr.  J. 
Herbert  Case,  vice-president  of  the  Franklin  Trust  Company, 
upon  "The  Desirability  of  Commercial  Paper  as  an  Invest- 
ment," will  reassure. 

"We  have  a  wonderful  and  tremendous  country,  with  a 
population  now  of  nearly  ninety-five  millions  of  people  and 
constantly  increasing,  possessing  the  greatest  amount  of 
wealth  per  capita  of  any  people  on  the  globe.  They  constantly 
require  things  to  eat  and  drink  and  wear,  .  .  .  This  enormous 
daily  consumption  of  commodities  .  .  .  constitutes  then  the 
real  justification  for  the  issuance  of  notes  by  the  merchant 


CREDIT  121 

and  manufacturer,  the  individual  firm  or  corporation,  through 
whose  hands  these  commodities  are  steadily  passing  on  the 
way  to  the  ultimate  consumer.  The  annual  value  of  our 
farm-products  alone  in  1911  is  said  to  have  exceeded  nine 
billion  dollars.  Think  of  it,  an  amount  equal  to  the  entire 
resources  of  all  our  7200  banks !  Does  not  this  in  itself 
explain  in  some  measure  the  legitimate  need  of  temporary 
capital  to  plant,  to  cultivate,  to  harvest,  to  transport  and  to 
market  this  enormous  annual  yield  of  our  farms;  and  does 
it  not  also  constitute  a  fairly  sound  basis  for  the  issuance 
of  such  notes  ?" 

Mr.  Case  is  also  authority  for  the  statement  that  a  single 
bank  in  New  York  City  purchased  within  ten  years  over  seventy 
millions  of  dollars  worth  of  commercial  paper,  with  loss  in  only 
a  single  instance,  and  that  amounting  to  less  than  one  three- 
hundredth  of  one  per  cent  of  the  whole.  He  cites  the  address 
of  Mr.  James  J.  Cannon  before  the  Finance  Forum,  stating 
that,  of  the  $453,000,000  of  securities  held  against  the  Clearing 
House  Loan  Certificates  at  the  time  of  the  1907  panic,  73  per 
cent  consisted  of  commercial  paper  and  27  per  cent  of  stocks, 
bonds,  etc.  Yet  much  of  this  has  escaped  our  tabular  statistics 
given  above. 

Farm-credits. — The  issue  of  credit-instruments  based  directly 
upon  farm-property  is  itself  a  huge  business,  with  a  huge 
literature.  Other  countries  than  this  have  proceeded  much 
further  by  governmental  action  in  this  direction  than  we  have. 
Our  own  land  experienced  an  agitation  for  such  federal  action 
in  the  "sub-treasury"  scheme  of  the  populists,  about  the  year 
1890,  but  the  commercial  spirit  of  the  land  was  too  strong  for 
its  adoption.  We  have  continued  to  rely  upon  the  indirect 
method  of  farm-mortgages  discounted  by  the  banks,  a  system 
in  which  indirectness  furnishes  better  opportunity  for  com- 
mercialism. 

Industrial  Credits. — As  to  the  use  of  the  ordinary  valuation 
of  factories  and  their  products,  and  of  the  current  business  of 
merchants,  jobbers,  etc.,  as  a  basis  for  credit  issued  by  banks, 
that  is  too  familiar  to  every  reader  to  need  argument. 

Retail  Credits. — Even  between  the  retailer  and  the  Ultimate 
Consumer  there  occurs  a  constant  extension  of  credit  roughly 
proportional  to  the  sales  effected.  Every  merchant  must  count 
upon  the  skillful  handling  of  huge  volumes  of  small  credit- 


122  MODERN   ECONOMIC   TENDENCIES 

accounts,  as  one  of  the  most  important  elements  in  success.    Mr. 
James  B.  Griffith,  writing  of  "Credit  Organization/'  says : 

"Acknowledged  specialists  may  be  employed  in  every  branch 
of  an  enterprise,  the  shrewdest  brains  may  be  engaged  in 
buying,  producing  and  selling,  but  the  final  conservator  of 
the  business  is  the  credit-man;  others  may  be  the  profit- 
makers,  but  he  is  the  profit-saver.  .  .  .  He  is  on  guard  con- 
stantly— always  on  the  lookout  for  the  slightest  sign  of 
danger,  ever  ready  to  take  prompt  and  vigorous  action  to 
avert  disaster  to  his  house  or  to  lend  a  helping  hand  to  a 
customer.  His  duties  make  him  the  most  misunderstood 
man  in  the  entire  organization.  .  .  .  On  no  man  in  the  or- 
ganization is  there  such  tremendous  pressure  brought  to 
secure  favors;  on  no  man  do  the  consequences  of  his  own 
mistakes  come  back  so  surely." 

In  Table  11  the  aggregate  volume  of  such  credit  currently 
extended  is  estimated  by  assuming  that  the  aggregate  wages 
and  salaries  of  Table  40  are  all  expended  in  retail  trade,  with 
an  average  extension  of  credit  of  thirty  days.  It  is,  of  course, 
true  that  not  all  of  these  incomes  are  expended  entirely;  some 
are  saved.  But  as  there  exist  no  statistics  as  to  the  vast  sums 
currently  expended  for  retail  purchases  by  persons  enjoying 
incomes  other  than  wages  or  salaries,  and  since  wages  and 
salaries  are  usually  spent  upon  much  longer  terms  of  credit 
than  thirty  days,  the  above  method  results  in  an  estimate  which 
is  certainly  conservative.  Not  only  is  the  average  term  of 
credit  upon  purchases,  even  from  wages,  more  than  thirty  days 
but,  contrary  to  natural  expectation,  it  develops  that  purchases 
made  from  unearned  incomes  average  much  longer  demands  for 
credit  than  those  from  wages. 

It  is  specifically  to  be  noted  that  Table  11  does  not  pretend 
to  give  actual  volumes  of  credit  issued,  but  merely  barometric 
index-numbers  of  the  possible  bases  for  the  issue  of  credit- 
instruments.  The  actual  issue  bears  some  proportion  thereto 
which  is  probably  roughly  constant,  but  never  exactly  so.  The 
issue  of  credit  has  never  been  a  function  which  shrank  modestly 
from  expanding  to  the  utmost  limit  of  its  basis. 

The  figures  in  parenthesis  represent  interpolations  between 
census-years,  or  estimates  inexact  from  other  reasons.  The 
figures  for  "States,  etc.,"  for  the  earlier  decades  are  only  ap- 


CREDIT 


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124  MODERN  ECONOMIC  TENDENCIES 

proximate.  For  the  later  decades  these  figures  rise  rapidly, 
owing  to  the  increasing  economic  activities  of  the  larger  cities, 
a  feature  which  has  arisen  chiefly  since  1890. 

The  Evolution  of  Credit. — The  history  of  credit  thus  shows 
it  to  have  been  an  institution  which  has  developed  as  thoroughly 
as  have  any  of  our  other  appliances  of  modern  existence.  While 
our  vehicles  have  been  growing  from  saddles  or  ox-carts  to 
Pullman  trains — while  our  boats  have  been  evolving  from  un- 
decked wooden  vessels,  with  oars  and  a  single  sail,  into  the 
power  and  intricacy  of  steel,  steam  and  electricity  in  the  modern 
liner — our  credit-system  has  likewise  been  experiencing  a 
parallel  evolution  in  magnitude,  complexity  and  power  fully 
equaling  that  of  its  mechanical  contemporaries.  Our  financial 
tools  have  developed  with,  and  as  a  result  of,  our  physical  ones. 
Perhaps  in  speed,  power,  intricacy,  and  faculty  for  destruction 
of  human  life,  when  incompetently  guided,  our  commercial  and 
financial  inventions  have  even  outstripped  our  mechanical  ones. 

For  the  parallel  evolution  of  physical  appliances,  technical 
knowledge  and  financial  instruments  has  been  mutually  and 
closely  interdependent,  rather  than  merely  accidental.  It  is 
far  more  than  a  chance  coincidence,  for  instance,  that  the  first 
bank-check  in  modern  history  was  drawrn  within  two  years  of 
the  date  (1781)  when  James  Watt  first  made  steam-power — 
which  had  previously  been  available  only  for  pumping  mines 
free  from  water — useful  for  the  rotation  of  factory-shafting. 
It  is  more  than  mere  luck  that  Lloyd's  coffee-house,  in  London, 
sheltered  the  first  underwriters  of  marine  insurance  as  they  met 
at  lunch — afterwards  to  become  their  headquarters  and  to  supply 
the  business  with  its  name — just  at  the  time  when  appeared 
the  first  ships  with  rigs  sufficiently  developed  (by  the  com- 
bination of  square  with  fore-and-aft  sails  in  modern  fashion, 
and  by  the  abandonment  of  the  lateen  mizzen)  to  open  distant 
seas  to  profitable  trading,  upon  a  scale  mechanically  impossible 
before. 

Economic  Reform. — Therefore,  whatever  suggestion  for  an 
economic  system  better  than  the  present  one  may  be  offered, 
a  first  requisite  for  its  success  is  that  it  must  center  its 
mechanical  design  upon  an  adequate  provision  for  the  fluid  cir- 
culation and  elastic  expansion  of  credit,  based  upon  the  general 
wealth  of  the  country.  This  design  must  be  as  highly  developed 
financially  as  is  the  modern  factory-system  mechanically. 


CREDIT  125 

Yet  this  far  and  apparently  impossible  accomplishment  would 
be  attained  by  the  mere  replacement  of  the  commercial  system 
by  a  completion  of  our  long  familiar,  but  only  partially  de- 
veloped, factory-system.  For  this  would  necessarily  involve  the 
substitution  of  non-interest-bearing  factory-requisitions  for 
interest-bearing  commercial  securities,  as  circulating-medium. 

These  requisitions  would  then  circulate  in  a  perfectly  elastic 
volume,  expanding  and  contracting  automatically  in  perfect 
accord  with  the  volume  of  trade.  They  would  possess  ideal 
stability,  from  being  founded  upon  the  entire  wealth  of  the 
country.  They  would  be  insensible  to  fluctuations  in  the  supply 
or  price  of  gold.  They  would  offer  no  one  the  slightest  tempta- 
tion to  expand  them  unduly.  They  would  contract  without 
collapse  when  need  for  it  arose. 

For  it  is  the  immanent  presence  of  a  perfection  of  mutual 
credit  throughout  our  vast  national  factory-system  which  (in 
connection  with  the  co-operative  spirit  resultant  from  the 
elimination  of  all  owner ship-in-industry)  explains  that  mar- 
velous efficiency  and  productivity  which  has  flooded  the  world 
with  a  volume  of  commodities  and  riches  unknown  in  human 
history.  That  is  the  central  fact  of  past  history  and  of  present 
problems.  As  the  social  topic  is  pursued  further  and  further 
into  detail  it  will  increasingly  appear  that  our  conclusions  must 
be  guided  by  an  unremitting  alertness  to  the  basic  importance 
of  credit,  in  all  sorts  of  economic  interaction,  as  the  one  solvent 
catalytic  essential  for  reducing  the  clashing  solidity  of  un- 
organized community-life  into  that  fluidity,  energy  and  del- 
icacy, combined,  which  we  now  dimly  discern  to  be  the  attributes 
of  civilization. 

Our  Opportunity  for  Voluntary,  Ethical  Aid  to  the  Eco- 
nomic Situation. — Credit,  in  this  connection,  means  both  the 
intangible  and  the  tangible.  We  need  a  far  better  tangible  in- 
strument than  the  interest-burdened  privately-owned  security. 
That  we  shall  find  in  the  requisition-papers  of  a  nation-wide 
factory-system. 

But  we  also  need,  in  order  to  attain  to  any  such  an  ideal, 
common-sensible  system  as  that,  a  far  better  intangible  con- 
fidence in  one  another  than  now  prevails.  We  need  a  far  better 
mutual  confidence  than  can  possibly  be  attained  by  starting  off 
with  a  worship  of,  and  a  cultivation  of  faith  in,  selfishness 


126  MODERN   ECONOMIC   TENDENCIES 

as  the  prime  and  only  reliable  motive  force  within  the  human 
race. 

There  are  too  many  people  preaching  brotherly  love  who 
fail  to  realize  that  love  and  faith  are  synonymous.  Our  boasted 
love  of  our  fellowman,  whether  religious  or  patriotic,  is  barren, 
unless  we  have  far  greater  faith  in  him  than  to  believe  that 
he  is  sensitive  to  no  higher  appeal  than  that  afforded  by  profits, 
interest  and  dividends.  We  are  blind  ourselves  unless  we  have 
greater  faith  in  his  ability  to  see  that  even  his  selfish  interests 
are  best  conserved  under  a  system  which  makes  him  richest  when 
he  is  enriching  his  neighbors. 

We  do  not  really  respect  the  flag  unless  we  have  the  same 
high  and  courageous  faith  in  things  not  yet  embodied  in  suc- 
cessful statecraft  as  that  faith  which  sustained  those  who  first 
wrought  the  flag,  when  we  and  our  accomplishments  and  our 
problems  were  undreamed.  We  are  no  patriots  at  all  if,  every 
time  we  bump  into  a  strike,  or  a  slum,  or  a  "trust,"  or  a  piece 
of  graft,  or  any  other  manifestation  of  commercialism,  we 
malign  our  political  government  as  the  cause  thereof,  and  decry 
democracy  as  inferior  to — what?  Still  less  are  we  consistent, 
or  democratic,  or  patriotic,  if,  every  time  that  commercial  se- 
curities, which  are  based  upon  mutual  antagonisms  and  embody 
organized  hatred,  threaten  to  collapse,  we  fall  into  a  panic  and 
declare  that  the  heavens  are  about  to  descend. 

At  such  times,  if  we  fail  to  realize  that  all  these  things  were 
made  by  and  for  man,  not  man  for  them,  we  can  have  no  true 
love  of  God,  nor  faith  in  man,  in  our  hearts.  Without  those 
sentiments  we  can  never  build  a  successful,  stable  system  of 
economic  credit-instruments;  and,  lacking  this,  we  can  never 
have  a  truly  civilized  state. 


CHAPTER  VI 

THE  BASIC   CONTRAST  IN  ECONOMICS 

THE  archaic  and  now  obsolete  cottage-system  of  industry, 
we  have  seen,  comprised  two  distinct  functions,  namely:  (1) 
That  of  production  proper,  including  superintendence  and 
useful  transportation;  and  (2)  that  of  negotiation  incidental 
to  the  selling  of  product,  or  the  procuring  of  tools  and  mate- 
rials. Thus  the  pristine  fisherman,  for  instance,  had  first  to 
catch  his  fish,  then  peddle  them  along  the  village-street,  and 
then  bargain  for  gear,  bait,  etc. 

Thus  industry  then  had  to  be  carried  on  under  a  system 
wherein  no  commodity  might  shift  from  man  to  man  without 
a  simultaneous,  parallel  shift  of  a  something  called  "owner- 
ship." Nowhere  in  this  archaic  system  did  industry  appear 
divorced  from  ownership,  as  everywhere  in  the  modern  factory- 
system. 

But  the  cottage-system,  with  its  ubiquitous  ownership-in- 
industry,  was  barren,  we  all  agree,  of  any  potentiality  for  the 
support  of  modern  populations,  in  anything  approaching 
modern  standards  of  comfort  and  luxury.  Efficiency  and  pro- 
duction, in  any  modern  sense,  appeared  only  with  the  factory- 
system. 

The  fertilization  of  this  barren  cottage-system  of  industry 
by  the  invention  of  modern  appliances  has  developed  amazingly 
both  of  these,  its  two  contrasted  functions,  along  two  increasingly 
contrasted  lines  of  evolution.  In  this  recent  social  evolution  the 
first,  or  productive  function  has  developed  into  the  modern 
factory-system.  The  second,  or  ownership-in-industry  and 
negotiative,  function  has  become  what  we  shall  here  call  the 
modern  market-system — or,  more  generally,  commercialism. 

The  Modern  Basic  Economic  Contrast— Production  versus 
Commercialism. — Whereas  in  the  obsolete  cottage-system  these 
two  functions  were  merged  and  confused  within  a  single  in- 
dividual, now  they  have  become  differentiated  and  specialized. 

127 


128  MODERN   ECONOMIC   TENDENCIES 

The  two  basic  classes  of  economic  society  specializing  upon 
these  two  functions  have  become  differentiated  into  increasingly 
contrasted  habitats,  manners  and  customs. 

The  contrast  between  these  two  departments  of  modern  ac- 
tivity is  even  more  basic  in  character  in  their  internal  organiza- 
tion, and  their  effects  upon  our  social  welfare,  than  they  are  in 
outward  form.  Although  we  shall  find  occasion,  later,  to 
emphasize  the  fact  that,  in  drawing  the  line  between  these  two 
functions,  we  are  classifying  activities,  rather  than  individuals 
— because  sometimes  the  most  opposite  activities  are  manifested 
by  a  single  individual  within  short  periods  of  time — yet,  that 
once  said,  it  may  be  noted  that  these  contrasted  activities  are 
usually  embodied  in  separate  individuals,  in  quite  different 
walks  in  life. 

It  should  be  stated  at  the  start  that  all  occupations — and 
also  all  passive  economic  functions,  such  as  the  holding  of 
interest-bearing  securities — must  be  capable  of  identification 
either  as  productive  of  life-support  for  the  Ultimate  Consumer, 
and  therefore  forming  a  part  of  our  national  factory-system, 
or  else  they  must  belong  to  the  commercial  or  market-system. 
That  is  to  say,  we  recognize  here  only  two  divisions  of  all  ac- 
tivities or  passivities  which  are  social-economic  in  character, 
namely,  productive  and  commercial  respectively.  Our  warrant 
for  taking  this  sweeping  position  will  appear  in  the  next  few 
pages.  Its  foundations  were  laid  in  Chapters  II  and  III. 

In  some  cases  it  may  not  be  obvious  whether  an  occupation 
is  productive  or  not;  but  if  it  obviously  concerns  ownership- 
in-industry  or  negotiation  then  it  must  be  classed  as  com- 
mercial. Conversely,  if  it  obviously  has  nothing  to  do  with 
ownership-in-industry  or  negotiation,  then  we  may  conclude 
that  it  is  productive,  and  a  part  of  the  factory-system,  even 
if  we  may  not  be  able  to  discern  just  what  it  produces.  Such, 
for  instance,  is  the  case  with  education. 

Fish  or  Cut  Bait. — It  has  been  stated  above  that  everything 
now  produced  for  the  life-support  of  the  community  of  Ulti- 
mate Consumers  is  the  result  of  the  activities  of  the  factory- 
system  department  of  social  energy.  If  so,  then  all  those  other 
activities  devoted  to  negotiation  and  other  commercial  destina- 
tions must  be  regarded  as  non-productive. 

This  is  a  sweeping  statement.  Yet  its  truth  is  incontro- 
vertible, because  founded  upon  an  equally  sweeping  fact  of 


THE   BASIC   CONTRAST   IN   ECONOMICS  129 

modern  industry.  This  is  that  not  a  single  capitalist-employer 
of  labor  ever  permits  any  form  or  feature  of  commercialism 
to  find  lodgment,  even  for  a  moment,  upon  the  premises  which 
he  controls.  To  this  statement  there  is  no  exception  to  be 
found,  across  all  the  continents  and  nations  yet  modernized  by 
commercialism. 

That  is  to  say,  we  are  dealing  here  not  with  some  majority- 
opinion,  or  preferred  policy,  on  the  part  of  men  of  affairs,  but 
with  a  unanimous,  rigid,  basic  tenet  of  the  businessman's  faith. 
He  everywhere  excludes  rigorously  all  ownership-in-industry 
and  all  negotiative  effort  from  the  precincts  of  his  authority. 

He  does  this  because  he  knows  that  the  instant  such  institu- 
tions were  permitted  to  enter  at  the  door,  the  efficiency  of 
his  factory  would  fly  out  of  all  the  windows  at  once.  He  does 
this  because  he  knows  subconsciously,  although  he  may  not 
have  given  the  matter  conscious  thought,  that  the  modernized 
nations  of  the  globe  have  prospered  in  material  wealth  and 
power  beyond  any  precedent  of  history,  just  as  rapidly  and  in 
so  far  as  they  have  adopted  this  rigorous  exclusion  of  all  com- 
mercialism from  within  their  productive  organizations. 

This  universal  tenet  of  all  capitalist-employers  and  men  of 
affairs  we  shall  accept  at  its  face-value,  as  the  one  basic  founda- 
tion for  all  material  welfare  and  prosperity,  as  the  one  basic 
guide  for  understanding  political  economy.  The  only  thing 
radical  about  these  following  pages  is  that  we  propose  to  follow 
this  tenet  to  its  logical  conclusions,  just  as  rigorously  as  the 
commercialists  lay  it  down  in  their  de  facto  premises. 

A  Deadly  Parallel. — For,  if  there  be  any  doubt  as  to  the  basic 
character  of  this  distinction  between  the  obsolete  cottage- 
system  and  the  factory-system,  or  between  modernized  commer- 
cialism and  the  factory-system,  on  the  score  of  relative  efficiency, 
it  must  be  dispelled  immediately  upon  any  serious  proposal 
for  the  abandonment  of  the  factory-system,  even  while  retaining 
modern  factory-appliances  and  superintendence,  for  a  return  to 
the  cottage-system  made  up  of  ownership-everywhere-in-industry. 
Let  us  imagine,  for  instance,  that  in  a  modern  factory  compris- 
ing several  different  departments,  between  which  interchange 
of  materials  and  service  is  occurring  constantly,  the  now  ob- 
solete cottage-system  is  again  installed,  requiring  individual 
ownership  in  things  as  a  prerequisite  to  their  use. 

All  the  other  attributes  of  a  modern  factory — unity  of  superin- 


130  MODERN   ECONOMIC   TENDENCIES 

tendence  (so  far  as  it  can  survive  the  change),  supplies  of 
power,  the  latest  tools,  modern  raw  materials,  etc. — to  which 
exclusively  the  marvelous  efficiency  of  the  modern  factory- 
system  is  now  usually  attributed  by  the  authorities  upon 
political  economy — are  to  remain  as  now.  The  only  change  is 
that  property  in  industry,  as  an  institution,  is  to  be  re-in- 
augurated within  the  modern  factory,  as  it  prevailed  a  century 
or  more  ago  everywhere  in  industry. 

This  imaginary  situation  would  be  exactly  what  would  have 
resulted  if  the  last  century  had  been  devoted  solely  to  the  inven- 
tion of  appliances,  without  creation  of  the  factory-system. 

In  the  first  place  (we  are  supposing)  each  workman  mast 
now  actually  own  every  tool  before  he  can  use  it.  This  of 
itself  immediately  throws  out  of  use  the  greatest  majority  of  all 
modern  appliances  and  the  majority  of  all  workmen.  The 
average  modern  tool  is  far  too  costly  for  the  average  modern 
workman  to  acquire  it.  But  a  minority  of  the  workmen  would 
still  be  able,  under  our  imaginary  system,  to  acquire  some  one 
or  other  of  the  less  costly  appliances,  to  use  them  as  best  they 
might  alone.  With  time,  we  shall  see,  groups  of  workmen  would 
inevitably  be  formed  for  the  purpose  of  owning  the  more  costly 
tools. 

Next,  each  workman  must  actually  buy  his  supply  of  raw 
material  before  he  can  begin  work  upon  it.  Even  where  these 
materials  are  fairly  raw  in  fact,  as  with  lumber,  bar-iron,  etc., 
he  can  of  course  buy  only  at  a  disadvantage.  But  we  will  not 
hamper  him  at  present,  in  our  supposition,  with  any  demoraliza- 
tion of  his  external  sources  of  supply,  such  as  must  inevitably 
occur  with  the  extension  of  our  supposition  to  other  factories 
than  his  own.  His  market  for  supplies  may  be  assumed  to  be 
what  it  is  now. 

But  in  this  market  he  appears  as  an  individual  buyer.  Any 
businessman  or  purchasing-agent  knows  what  that  means.  He 
buys  at  a  tremendous  handicap,  as  to  both  price  and  quality. 
He  uses  only  small  quantities;  hence  he  cannot  command 
favors.  He  gets  merely  the  leavings,  the  haphazard  remnants, 
of  no  standard  quality;  or,  if  he  insists  upon  cutting  into  a 
standard  lot,  he  pays  double  price  for  the  privilege.  One  of 
the  prime  sources  of  efficiency  of  the  modern  factory,  its  ability 
to  purchase  and  handle  materials  in  large  quantities,  has  been 
lost  at  the  outset. 


THE  BASIC   CONTRAST  IN  ECONOMICS  131 

But  in  modern  factories  each  workman  usually  gets  his 
"materials"  in  a  far  from  raw  state.  Not  only  are  they  worked 
up  for  him  by  outside  factories,  as  lumber  and  bar-iron  are, 
or  still  more  as  we  have  seen  the  materials  of  the  shoemaker  to 
be,  but  they  have  already  been  worked  upon  by  other  workmen 
within  his  own  factory. 

Again,  when  he  finishes  his  task  his  produce  is  still  a  long 
way  from  the  Ultimate  Consumer.  It  goes,  instead,  to  a  long 
line  of  workmen  each  of  whom  must  develop  it  a  step  farther 
before  it  can  be  of  use. 

As  emphasized  in  a  preceding  chapter,  this  constant,  active 
flow  of  partly  finished  materials  from  workman  to  workman 
constitutes  the  very  life-blood-circulation  of  the  modern  factory. 
Yet  scarcely  any  conceivable  phenomenon  could  so  completely 
derange,  block,  demoralize  and  paralyze  this  factory-circulation 
of  goods  and  service  as  would  the  permeation  throughout  the 
factory  of  the  commercial  institution  of  ownership-in-industry. 
A  modern  factory-equipment  clogged  with  the  property  and 
ownership  ideas  of  the  cottage-system  would  be  just  about  as 
useful  and  efficient,  and  would  be  just  about  the  same  sort  of 
an  anachronism,  as  would  be  the  steamships  "Olympic"  or 
"Leviathan"  when  manned  by  a  crew  of  coracle-paddling  pre- 
historic Britons ! 

For,  in  such  an  imaginary  factory,  whenever  a  workman  fell 
sick,  etc.,  his  part  of  the  work  must  stop  until  he  gets  well, 
or  until  some  other  waiting  and  idle  workman  might  be  found 
to  buy  out  his  collection  of  tools.  But  meantime  the  product 
of  workmen  preceding  him  must  pile  up  in  the  shop,  which  these 
preceding  workmen  cannot  afford  to  have  it  do ;  for  they  receive 
"wages,"  turn  over  their  capital  and  buy  fresh  raw  material 
only  as  this  sick  workman  ordinarily  buys  up  their  product. 

Similarly,  the  workmen  following  the  sick  one  must  soon 
cease  work,  for  with  his  illness  their  supply  of  raw  material 
ceases.  Nor  may  any  other  workman  replace  the  sick  one 
temporarily,  because  the  requisite  tools  are  "his"  and  could  not 
be  subjected  to  the  control  and  use  of  another  without  incurring 
the  most  intricate  questions  as  to  title,  share  of  the  reward, 
responsibility  for  wear,  damage,  accident,  etc. 

Plainly  a  first  requisite,  although  a  costly  and  wasteful  one, 
for  keeping  matters  moving  at  all,  under  the  ownership-in-in- 
dustry system,  is  to  have  at  every  point  a  duplication  or 


132  MODERN   ECONOMIC   TENDENCIES 

multiplication  of  men  and  facilities,  beyond  the  natural  need, 
so  that  should  one  fall  idle  the  others  may  carry  on — with  the 
result  that  whenever  all  are  well  some  must  be  idle  anyhow. 
This  is  in  direct  contrast  with  the  factory-system,  where 
monopoly  prevails  everywhere.  Only  one  appliance  is  provided 
for  each  job,  and  that  is  entrusted  to  one  man  or  another,  upon 
full  credit,  as  need  may  arise.  No  unnecessary  duplication  in 
parallel  is  ever  permitted. 

To  the  modern  superintendent  of  industry  the  prime  requisite 
for  efficiency  is  to  have  each  tool,  or  job,  or  lot  of  raw  material 
equally  available  for  any  man,  and  each  man  ready  to  undertake 
any  job  or  use  any  tool  at  need — all  question  as  to  who  or 
what  being  determined  solely  with  a  view  to  getting  out  the 
work.  But  under  any  "system"  of  ownership-in-industry,  man 
and  machine  are  linked  together  as  rigidly  and  helplessly  as 
were  the  peasant  and  the  land  under  the  ancient  feudal 
system.  And  these  two  systems  are  about  equally  paralyzing 
to  progress  in  civilization. 

For  instance,  American  engineers  erecting  bridges  or  the  like 
in  oriental  countries  found  their  worst  obstacle  neither  in  the 
geographical  remoteness  of  locality  nor  in  the  inherent  ignorance 
of  the  natives,  who  proved  ready  learners  and  good  workmen. 
They  found  it,  instead,  in  the  prevalence  of  caste,  which  shackled 
certain  men  to  certain  jobs. 

Thus  a  native  hired  as  a  riveter,  who  happened  to  drop  his 
rivet,  might  not  stoop  to  pick  it  up.  To  do  so  would  be  to  lose 
caste.  Unless  an  otherwise  unneeded  helper  of  low  caste  were 
kept  constantly  on  hand,  the  job  must  be  interrupted  and  the 
rivet  cool  until  a  low-caste  man  might  be  found  to  pick  up  the 
rivet. 

Such  a  situation,  the  direct  opposite  of  American  cheery 
readiness  to  undertake  any  task  needed,  without  regard  to  con- 
vention, is  intolerable  to  the  spirit  of  American  men  of  affairs. 
Yet  its  inefficiency  in  actual  India  is  as  nothing  compared  with 
what  would  prevail  in  our  imaginary  factory,  if  once  permeated 
with  the  antiquated  cottage-system  ideas  of  ownership-in-in- 
dustry. 

But  our  picture  of  this  inefficiency  is  barely  begun.  For 
each  workman,  before  he  can  receive  "wages"  for  his  productive 
effort,  must  find  a  market  for  his  goods.  He  must  divide  his 
time  between  factory-work  proper  and  peddling  his  produce, 


THE  BASIC  CONTRAST  IN  ECONOMICS          133 

just  as  the  pristine  fisherman  had  first  to  catch  his  fish  and 
then  hawk  them  along  the  village-street.  And  while  he  is 
peddling  his  goods  the  appliances  "belonging"  to  this  modern 
workman  (under  our  imaginary  ownership-in- industry  system) 
must  remain  idle,  just  as  the  fisherman's  boat  must  lie  idle 
upon  the  beach  until  he  succeeds  in  selling  his  catch. 

For  these  appliances  are  supposedly  "his,"  and  when  any 
question  of  title,  or  of  responsibility  for  what  belongs  to 
another,  is  raised  between  one  owner  and  another,  it  takes  an 
army  of  expensive  lawyers  to  keep  matters  even  half  straight. 
The  rights  of  property  are  sacred ! 

To  any  reader  enough  of  a  businessman  to  have  had  ex- 
perience in  selling,  this  peddling  part  of  our  imaginary  work- 
man's duties  will  plainly  be  done  with  an  inefficiency  appalling 
to  modern  minds — an  inefficiency  far  exceding  that  of  his 
productive  work.  The  limited  number  of  people  whom  he  can 
reach,  their  limited  and  varying  demands,  the  fluctuations  of 
demand  with  season,  the  many  reasons  for  spreading  produce 
over  wide  areas,  etc.,  are  all  vast  reasons  against  his  ever  being 
able  to  accomplish  alone  a  hundredth  part  of  what  is  accom- 
plished by  a  modern  selling-force.  These  reasons  can  receive 
no  more  than  mention  here.  Commercial  readers  can  easily 
fill  out  the  blank  from  their  own  experience.  Non-commercial 
ones  must  try  to  imagine. 

But  the  bulk  of  all  output  by  individual  workmen  is  not  in 
a  form  for  use  by  an  Ultimate  Consumer.  It  is  merely  a  thing 
advanced  one  step  toward  that  remote  end.  Therefore  the 
majority  of  all  workmen  in  our  imaginary  factory  must  find 
a  market  for  their  goods  among  their  fellow-workmen,  who 
wrill  buy  not  to  consume,  but  to  manufacture  further.  In  the 
actual  world  this  forms  the  greater  portion  of  what  is  wrongly 
called  consumption — the  purchase  of  goods  for  further  manu- 
facture, or  for  resale,  and  not  for  consumption  at  all. 

In  short,  no  workman  under  this  imaginary  system  of  own- 
ership within  the  factory  could  ever  secure  either  a  supply  of 
material  on  which  to  work,  or  a  destination  for  his  produce, 
without  himself  seeking  some  other  workman  happening  to 
occupy  the  particular  stage  in  manufacture  which  fitted  in 
before  or  after  his  own,  then  selecting  which  one  among  several 
such  might  best  serve  his  own  ends,  and  finally  haggling  with 
him,  or  with  first  one  and  then  another,  over  price  and  quality 


134  MODERN   ECONOMIC   TENDENCIES 

— praising  his  own  goods,  decrying  his  opponent's,  cajoling  his 
man,  making  offers  or  "propositions,"  rejecting  others,  bluffing, 
retiring  from  the  market  while  he  still  desired  to  buy  or  sell, 
returning  after  waste  of  time  to  seek  a  better  offer,  or  to  accept 
that  which  he  had  hoped  might  be  bettered  but  which  was  not. 
All  unity  of  superintendence  and  efficient  co-ordination  must 
disappear,  with  the  authority  of  the  Central  Office,  as  soon  as 
each  workman  becomes  an  independent  owner  of  industrial 
appliances  or  materials. 

But  these  evils  already  recounted  form  only  the  beginning 
of  the  trouble.  Because  of  these  very  obstacles  to  progress 
human  nature  will  attempt  to  overcome  them  by  organizing 
against  them,  to  what  degree  is  possible.  But  this  sort  of 
organization  only  makes  matters  worse.  Organizing  an  error 
makes  the  evil  worse,  just  as  organizing  truth  multiplies  good. 

The  Modern  Economic  Despot:  Ownership  Synonymous 
with  Opportunity. — For  two  things  will  quickly  become  clear 
to  the  workmen  of  our  imaginary  factory  permeated  with  owner- 
ship-in-industry,  namely : 

(1)  That  ownership  of  tools  or  materials,  having  now  been 
artificially  elevated  not  merely  into  a  peerage  with  productive 
use,  but  beyond,  into  an  overlordship,  because  needlessly  made 
a  prerequisite  to  use,  has  speedily  become  master  and  despot 
over  that  latter  sort  of  effort;  and 

(2)  That  interchange  of  materials,  being  naturally  the  soul 
of  factory-production  and  a  pre-essential  to  all  productive  effort, 
but  now  become  possible  only  after  negotiation  as  to  price  and 
quality  at  each  step,  the  negotiation  of  opportunity  for  inter- 
change must  similarly  rise  in  relative  importance,  to  become 
a  line  of  effort  held  superior  to  production  itself. 

Economic  Caste. — Consequently  two  new  and  highly  special- 
ized vocations  will  add  themselves  promptly  to  the  usual  list 
of  factory-duties,  or  crafts;  and  these,  instead  of  taking  their 
place  beside  the  others  upon  a  footing  of  equality,  will  assume 
a  controlling  dominance  over  all  others,  commanding  every- 
where a  superior  reward.  These  vocations  will  be: 

(1)  Ownership,  as  a  profession  and  a  source  of  income,  and 

(2)  Salesmanship,  as  a  high  art. 

Each  of  these  vocations  will  soon  prove  to  be  far  more  lucrative 
than  any  of  the  branches  of  production  proper.  Therefore  an 
inevitable  migration  of  labor  from  productive  crafts  into  these 


THE   BASIC   CONTRAST   IN   ECONOMICS  135 

new  vocations  will  have  been  set  up  thereby.  Parity  of  craft 
and  opportunity,  now  the  keynote  of  the  actual  factory- system, 
will  be  gone  from  our  imaginary  one.  The  economic  fields  of 
human  activity  will  have  developed  a  disparity  of  place  in  life 
such  as  we  have  always  jealously  excluded  from  our  political 
organization.  "Liberty  and  equality,"  of  which  we  are  now 
so  proud  in  our  political  traditions,  will  have  become  foreign 
to  our  economic  standards.1 

Further,  since  production  will  now  be  unable  to  proceed 
except  in  the  train  of  these  overlordly  vocations,  it  will  be  per- 
mitted by  them  to  develop  only  to  that  degree  which  results 
in,  not  the  maximum  output  from  the  factory  which  had  been 
physically  practicable  before  this  innovation  arrived,  but  only 
that  output  which  results  in  a  maximum  income  reaching  the 
non-productive  ownership  of  the  appliances  of  production;  or, 
secondly,  in  a  maximum  income  from  the  negotiation  of  op- 
portunity for  interchange  of  materials.  Hence  the  law  of  supply 
and  demand,  as  a  natural  balance  of  wholesome  psychic  im- 
pulses, will  have  been  needlessly  dethroned  from  its  normal 
sovereignty  over  industry,  and  productive  effort  made  sub- 
servient to  an  abstract,  indirect,  unnatural  and  soulless  institu- 
tional determination. 

Charging  All  the  Traffic  Will  Bear.— Thus,  once  admit  into 
the  most  modern  factory  the  ancient  cottage-system  principle 
of  ownership-in-industry,  as  an  institution  upheld  by  law, 
public  opinion  and  tradition,  and  all  interchange  and  produc- 
tion proceeding  within  that  factory  will  thereby  have  been  re- 
stricted, automatically  and  uncontrollably,  to  that  point  where 
the  return  to  the  owner  or  negotiator  attached  to  each  productive 
process,  rather  than  to  the  producer  or  the  Ultimate  Consumer, 
is  a  maximum.2 

Thus,  in  our  imaginary  factory,  one  man  with  a  keen  eye 
to  personal  advantage  will  secure  control,  through  ownership, 
of  the  boiler-room.  He  knows  that  all  need  steam.  Hence  he 
concentrates  his  brains  and  brawn  and  nerve  upon  acquiring 
possession  of  the  source  of  supply.  This  is  what  is  called  com- 
mercial "initiative." 

1  See  the  later  chapter  upon  Unemployment  for  a  development  of  this 
idea. 

2  See  the  later  chapter  upon  Economic  Equilibrium  for  a  development 
of  this  idea. 


136  MODERN   ECONOMIC   TENDENCIES 

He  does  not  do  this  from  any  natural  affection  for  steam- 
making,  nor  from  a  weak  indulgence  in  its  excessive  consump- 
tion. He  does  not  consume  a  particle  of  it.  He  does  not 
create  any  instrument  for  its  production.  He  merely  secures 
control. 

He  does  not  do  this  evil,  destructive  thing  because  of  any 
immoral  or  psychic  impulse  whatever,  but  merely  because  so- 
ciety has  supposedly  provided  no  properly  organized  way  for 
supplying  this  factory  with  steam,  by  arranging  a  non-owning 
co-operation  between  steam-makers  and  steam-users,  as  in  the 
actual  factory-system.  Indeed,  in  view  of  this  imaginary  lack 
in  the  social  consciousness  of  his  community,  this  owner  of 
the  boiler-house  has  done  the  best  possible  under  the  circum- 
stances; but  he  has  incidentally  stabbed  the  modern,  efficient 
and  lavishly  productive  factory-system  to  the  very  heart. 

As  for  the  production  of  the  steam  itself,  this  enterprising 
boiler-house  owner  probably  knows  little,  and  cares  less,  about 
the  art.  He  finds  plenty  of  half-hearted,  peace-and-work-loving 
wretches  ready  to  shovel  coal  under  his  boilers  for  small  pay. 
The  talent,  or  "initiative,"  of  this  man  is  not  for  production  at 
all,  in  any  of  its  branches,  but  for  commercial  combat.  His  aim 
is  control,  not  use;  and  ultimately  tribute,  not  equitable  ex- 
change. For  if  it  were  any  of  these  latter  he  would  promptly 
abandon  his  policy  of  ownership-in-industry,  which  obviously 
only  interferes  with  both  production  and  exchange,  and  enroll 
his  services  in  the  normal,  familiar  factory-system,  which  pro- 
vides for  a  steam-supply  without  any  separate  ownership  of  the 
boiler-house,  and  in  which  income  always  takes  the  form  of 
wages  or  salary. 

The  common  idea  that  ownership  of  the  boiler-house  by 
someone— usually  the  owner  of  the  entire  factory— is  a  neces- 
sary pre-requisite  to  a  steam-supply  will  not  stand  scrutiny; 
but  that  more  penetrating  scrutiny  must  be  deferred  until  we 
can  reach  a  broader  stage  of  the  analysis.  For  the  present  it 
is  enough  to  note  that,  so  far  as  all  the  processes  occurring 
within  the  factory  are  concerned,  human  nature  finds  itself  far 
better  able  to  make  and  use  steam  efficiently  without  separate 
ownership-in-industry  than  with  it.  If  we  but  extend  that 
same  idea  to  cover  the  making  and  use  of  boilers,  as  well  as  the 
steam  made  from  them,  we  shall  see  that  the  ownership  of  the 


THE   BASIC   CONTRAST   IN   ECONOMICS  137 

boiler-house,  by  anybody,  is  a  function  naturally  extraneous 
and  irrelevant  to  production. 

But,  in  our  imaginary  modern  factory  permeated  with  own- 
ership-in-industry,  this  boiler-owner  is  after  a  maximum  in- 
come to  himself,  and  not  the  maximum  output  of  produce, 
concerning  which  latter  he  cares  nothing.  So  his  office  is  first 
to  drive  away  from  the  boiler-room  door  all  who  would  dispute 
his  control  (and  these  will  inevitably  be  many)  and  then  to  say 
to  every  man  in  the  factory:  "Not  an  ounce  of  steam  do  you 
get  unless  each  of  you  pays  me  tribute." 

Profit  Is  Tribute. — Nor  can  this  tribute  claim  to  be  merely 
the  natural  cost  of  the  steam.  For  this  natural  cost  is  that 
which  the  normal,  actual  factory  now  pays  for  its  steam,  and 
his  tribute  begins  only  after  all  this  natural  cost  of  the  steam 
has  been  met  and  exceeded.  It  is  only  as  the  price  runs  above 
the  natural  cost  that  the  function  of  ownership  can  derive  any 
income  at  all. 

Similarly  the  engine-room  would  be  found  to  be  in  charge 
not  of  the  best  engine-runner,  but  of  the  best  commercial 
fighter.  He  also  announces  calmly :  "Not  a  wheel  in  the  fac- 
tory may  turn  unless  I  get  tribute  from  all!" 

Here  again  it  is  not  costs  which  are  demanded.  The  natural 
cost  of  power,  in  the  form  of  wages,  depreciation,  fuel,  etc.,  is 
now  charged  up  against  every  workman  in  our  actual,  existing 
factory-system;  and  what  we  are  debating  now  is  something 
foreign  to  every  factory  in  the  land,  something  religiously  de- 
barred by  every  employer  of  labor  in  America — profits  over 
and  above  natural,  factory-system  costs. 

So  all,  in  our  imaginary  factory,  will  pay  up  this  pure 
tribute,  in  addition  to  the  natural  cost  of  power,  because  to 
refuse  is  paralysis  and  starvation.  Meanwhile  the  engine  gets 
itself  run  somehow  by  strictly  second-class  talent,  because  all 
first-class  talent  is  busy  collecting  tribute  through  ownership 
or  negotiation. 

Equivalents. — Nor  is  it  relevant  to  reply  that,  even  under  the 
ownership-in-industry  system,  no  man  might  secure  such 
control  of  boiler  or  engine  until  he  had  first  produced  for 
society  the  fair  equivalent  in  value  of  boiler  or  engine,  with 
which  equivalent  he  had  honestly  purchased  the  appliance  in 
question — whereby  he  has  acquired  a  "right"  to  do  as  de- 
scribed. The  actual  modern  employer  of  labor  tells  his  men 


138  MODERN   ECONOMIC   TENDENCIES 

(in  effect)  that  they  may  save  up  and  buy  all  the  boilers  and 
engines  they  wish,  but  that  under  no  condition  may  they  bring 
them  into  the  factory  for  the  efficiency  of  which  he  is  re- 
sponsible, there  to  be  set  up  in  unity  of  use  under  heterogeneity 
of  ownership. 

Ownership-in-industry. — For  ownership  and  ownership-in- 
industry  are  two  very  different  and  directly  contrasted  things. 
If  our  imaginary  workman  who  had  saved  up  and  bought  the 
boiler-room  had  contributed  directly  to  society  all  which  he 
ever  produced  in  his  life,  he  could  never  make  good  to  it  the 
loss  which  he  imposed  upon  it  when,  as  an  individual  inde- 
pendent of  the  organization  of  the  factory,  he  intruded  into 
the  factory-system  his  private  ownership  of  boilers  which  other 
men  must  use  in  their  daily  work. 

But  the  public  opinion  of  this  imaginary  factory-community, 
permeated  with  eighteenth-century  ideas  as  to  the  necessity 
of  ownership-in-industry,  would  not  only  tell  all  owners  of 
boilers  and  engines  that  they  had  full  right  to  intrude  them 
into  the  productive  system,  by  installing  them  in  bodily  asso- 
ciation with  the  machines  owned  and  used  by  others,  but  it 
would  tell  all  workmen  that  there  was  no  other  way  of  securing 
the  privilege  of  steam-power  than  this — of  bargaining  with 
these  owning  fellows  as  to  the  tribute  over  and  above  natural 
cost  to  be  exacted  for  it. 

But  actual  modern  society,  of  course,  having  everywhere  be- 
fore its  face  the  familiar  factory-system,  and  knowing  there- 
from that  the  fullest  use  of  steam-boilers  is  not  only  com- 
patible with,  but  depends  upon,  their  non-ownership  by  the 
man  who  makes  the  steam,  or  by  any  other  agency  dissevered 
from  the  factory-organization,  knows  that  the  separate  owner- 
ship of  the  boilers  was  an  egregious  error  in  management — 
such  as  could  not  conceivably  occur  amidst  our  modern  ideas 
as  to  refinement  of  factory-efficiency — and  that  the  statement 
that  there  was  no  other  way  to  procure  steam  is  a  huge  mis- 
conception, a  community-delusion. 

But  our  imaginary  public  opinion,  supposedly  existent  before 
there  were  any  true  factory-system  standing  ready  to  teach  it, 
must  be  excused  for  its  inability  to  grasp  these  facts. 

The  Equities  of  Ownership-in-industry. — Therefore  the  de- 
bate between  the  archaic  cottage-system  of  universal  ownership- 
in-industry,  on  the  one  hand,  and  the  modern  factory-system 


THE   BASIC   CONTRAST  IN   ECONOMICS  139 

purged  of  all  ownership-in-industry  on  the  other,  pivots — when 
one  turns  to  questions  of  equity,  social  efficiency  and  rule  of 
conduct — upon  two  basic  questions.  It  is  true  that  both  of 
these  questions  are  swallowed  whole  by  every  man-in-the- 
street,  or  professional  teacher  of  sociology,,  who  now  upholds 
the  present  form  of  society  as  basically  right,  although  possibly 
wrong  in  detail.  Nevertheless,  in  any  sincere  analysis  of  the 
evolution  of  American  economics  these  two  questions  must 
ever  be  kept  to  the  fore,  as  shedding  first  light  upon  our  past 
path  and  our  future  goal.  These  questions  are : 

(1)  Is  it  wise  or  right  to  permit  any  man  to  invest  his 
savings  in  ownership-in-industry,  as  contrasted  with  mere  own- 
ership of  that  which  he  intends  to  consume*? 

(2)  Is    modern    ownership-in-industry    normally    purchased 
with   savings   from   productive   industry,   or   from   re-invested 
tribute  from  previous  ownership-in-industry? 

Full  answer  to  these  questions  must  be  deferred  until  later  in 
the  book.  But  since  it  is  a  rule  in  mathematics  that  the  ac- 
curate statement  of  a  problem  amounts  to  three-quarters  of  its 
solution,  it  must  be  recognized  here  at  the  start  that  the  obvious 
absurdity  of  the  modern  factory  imaginably  permeated  with 
ownership-in-industry  throws  straight  into  one's  face  these  two 
basic,  sweeping  questions. 

The  real  absurdity  of  this  incongruous  imagining,  of  a 
modern  factory  poisoned  by  infiltration  of  ownership-in-industry, 
cannot  be  fully  depicted  here.  The  situation  is  quite  a  parallel 
to,  and  not  one  whit  more  absurd  than,  the  imaginable  tradi- 
tion in  domestic  economy  which  might  declare  that  the  only 
way  to  determine  the  preferred  cook  was  to  open  the  kitchen 
to  all  applicants  for  the  place,  provide  all  of  them  with  fuel, 
raw  materials  and  dishes  for  a  simultaneous,  continuous  ex- 
periment in  cooking,  and  then  select  daily  the  best  cooked 
dinner  for  consumption,  but  paying  the  cost  of  all.  Or  the 
equal  absurdity  of  asking  each  applicant  for  the  job  to  bring 
her  own  cook-stove,  dishes  and  materials,  knowing  that  you 
would  have  to  pay  her  the  full  cost  thereof,  plus  a  profit, 
whether  you  ate  her  dinner  or  one  of  the  others. 

Evils  Multiplied.— So  (to  continue  the  simile  of  the  factory 
imbued  with  ownership-in-industry),  the  foundry,  the  machine- 
shop — or  perhaps  each  one  of  its  expensive  tools  owned  sepa- 
rately— the  tool-room,  the  pattern-shop,  the  paint-shop,  etc., 


140  MODERN    ECONOMIC    TENDENCIES 

would  each  be  found  to  be  "owned"  by  some  person  who  made, 
or  needed  to  make,  no  other  effort  at  life-support  than  that 
involved  in  maintenance  of  control.  In  each  case  skill  in  re- 
lation to  the  thing  owned,  or  to  the  work  performed  with  its 
aid,  has  nothing  to  do  with  the  identity  of  the  owner.  It  is 
combative  commercial  ability  which  alone  determines  who  shall 
enjoy  authority  and  tribute. 

The  methods  by  which  these  negotiators  might  maintain 
their  personal  control  over  production  would  be  various.  Some 
would  win  by  a  steely  eye  which  no  man  could  outstare;  some 
by  a  skillful  mention  of  half -truths;  some  by  a  magnetic  per- 
sonality, hypnotizing  the  victim  into  a  belief  that  anything  which 
so  magnificent  a  specimen  of  humanity  as  this  might  espouse, 
must  surely  be  all  right;  some  by  overbearing  perseverance, 
inducing  submission  as  preferable  to  annoyance;  some  by  a 
keen  perspicacity  as  to  personalities,  or  as  to  weak  spots  in  his 
adversary's  armor;  some  by  mere  endless,  persistent  circula- 
tion of  themselves  among  those  who  may  happen  to  need  in- 
terchange at  the  moment  when  they  appear. 

To  either  the  student  who  is  trying  to  understand  these  things 
or  the  Ultimate  Consumer  who  has  to  pay  all  the  bills  for  this 
wasteful  confusion,  it  makes  not  the  slightest  difference  whom 
fate  may  select  for  these  despotic  offices,  nor  what  psychological 
peculiarities  may  determine  the  choice.  The  supreme  fact  is 
that,  once  having  admitted  ownership-in-industry  as  an  institu- 
tion, then  the  despotism  and  the  waste  and  the  blocking  of 
production  become  inevitable.  Let  us  forget  personalities  and 
observe  institutions  and  their  fruits. 

Multiplicity  of  Agencies. — Then  the  worst  of  this  poisoning 
of  the  modern  factory  by  this  imaginary  ownership-in-industry 
lies  not  in  the  mere  fact  that  each  separate  tool  and  depart- 
ment must  inevitably  be  separately  owned,  so  that  interchange 
can  be  effected  only  through  costly  and  wearisome  negotiation. 
It  is  that,  owing  to  the  relative  profitableness  of  effecting  this 
interchange,  as  compared  with  either  production  proper  or  even 
passive  ownership,  men  would  flock  into  purely  negotiative 
callings,  without  necessarily  owning  anything  except  the  things 
they  bought  or  sold,  and  would  devote  themselves  to  quarreling 
over  the  privilege  of  effecting  interchanges  between  craftsmen 
of  different  trades. 

Thus  no  machinist  might  need  a  reamer  from  the  tool-room, 


THE   BASIC   CONTRAST  IN   ECONOMICS  141 

nor  a  molder  a  pattern  from  the  pattern-shop,  that  he  did  not 
find  himself  confronted  by  a  horde  of  competing  agents,  each 
pretending  to  help  him  secure  his  reamer  or  pattern.  Not  only 
would  he  find  himself  forced  to  select  some,  one  among  a  dozen 
separate,  competing  tool-rooms  or  pattern-shops,  but  he  would 
find  each  of  these  represented  by  a  dozen  different  agencies 
for  interchange,  or  brokers — some  of  them  authorized  and  some 
not. 

Each  would  assure  them  that  his  agency  was  the  best  and 
the  cheapest.  Yet  the  only  result  of  all  their  combative  efforts 
would  not  be  to  aid  the  poor  machinist  to  secure  more  or  better 
tools  than  now,  but  actually  to  force  him  to  rest  content  with  less, 
with  an  impoverished  supply  of  tools,  as  compared  with  what  is 
made  available  to  him  in  every  actual  factory;  and  further, 
he  must  pay  the  aggregate  cost  of  all  these  unwanted  inter- 
mediaries,  in  addition  to  the  natural  cost  of  the  tool  itself, 
before  he  may  enjoy  even  that. 

The  Ethics  of  Commercialism. — The  reader  will  note  care- 
fully that  to  none  of  these  agents  of  ownership-in-industry  has 
been  attributed  dishonesty  or  malice.  These  evils,  while  doubt- 
less more  or  less  present — invited,  indeed,  by  the  very  nature 
of  negotiative  vocations — are  not  the  topic  of  these  pages.  Our 
duty  is  merely  to  draw  a  fair  comparison,  from  the  point  of 
view  of  the  Ultimate  Consumer,  between  two  at  present  equally 
lawful  and  respected  methods  for  effecting  or  influencing  in- 
terchange between  different  trades  or  individuals,  as  an  incident 
to  supplying  him  with  the  necessaries  of  life.  These  two 
methods  are: 

(1)  That  of  the  actual  modern  factory,  from  which  owner- 
ship-in-industry has  always  been  universally  and  rigorously  ex- 
cluded; and 

(2)  That    of    ownership-in-industry    itself — an    institution 
originally  instanced  in  its  pure  form  in  the  cottage-system,  but 
now  developed  by  modern  invention  into  the  intricacies  of  the 
vast  commercial  system  of  the  day. 

We  are  inquiring  here  as  to  the  inherent  economic  natures  of 
these  two  methods  of  organizing  effort,  as  systems  or  institutions, 
with  a  view  to  learning  which  is  productively  the  more  effi- 
cient, and  not  at  all  as  to  the  moral  character  of  individual 
found  in  either.  At  present  we  are  not  even  inquiring  as  to 
what  sort  of  individual  naturally  gravitates  into  either  system, 


142  MODERN   ECONOMIC   TENDENCIES 

nor  what  may  be  the  reaction  of  the  system  upon  his  moral 
nature  after  he  has  landed  there.  We  are  studying  activities 
mnd  institutions,  not  men. 

Human  Gravitation  under  Commercialism. — Within  our 
imaginary  factory  permeated  with  ownership-in-industrj-  it  is 
certain  that,  because  of  the  abject  dependence  of  productive 
effort  upon  that  privilege  of  interchange  which  has  now  become 
dominated  by  negotiative  skill,  the  best  of  all  the  brains,  nerve, 
skill,  energy  and  proceeds  available  would  soon  be  going,  not  to 
the  productive  part  of  the  dual  system,  but  to  the  professional 
owners  and  bargainers.  For  bargaining  is  an  exceedingly 
profitable  calling.  In  a  given  amount  of  time  and  effort  a  sum 
may  be  acquired,  by  skillful  or  energetic  or  ruthless  bargaining, 
which  is  stupendous  in  comparison  with  what  can  be  produced, 
by  the  same  time,  effort,  skill  and  energy,  when  directed  against 
the  natural  obstacles  to  the  development  of  life-support. 

The  cogency  of  this  fact  in  assorting  the  several  sorts  of 
ability  within  our  imaginary  factory  is  obvious.  Not  only  those 
who  were  adapted  by  nature  to  bargain  successfully  would  turn 
to  that  calling,  but  many  less  skillful  must  inevitably  swallow 
the  tempting  bait,  and  be  lured  from  the  ranks  of  production 
into  those  of  commercial  combat  over  the  privilege  of  exacting 
tribute,  there  to  swell  the  statistics  of  commercial  failures  by 
their  casualties  in  battle  due  to  inaptitude. 

But  these  failures  are  not  really  due,  as  they  are  commonly 
attributed,  to  inherent  human  incompetence.  They  are  due  to 
the  fact  that  the  unnatural  prizes  of  commercialism  must  be 
continually  deluding  a  steady  current  of  the  commercially  inapt 
into  commercial  callings,  there  to  suffer  or  die  before  learning 
their  error,  whereas  in  production  they  might  have  succeeded, 
even  if  only  modestly. 

The  Sole  Source  of  Life-support. — There  would  thus  be  at 
work  within  this  imaginary  factory  two  distinctly  contrasted 
lines  of  effort.  One  of  these  lines,  comprising  all  those  sorts 
of  activity  which  were  prevalent  in  the  original  factory,  before 
its  permeation  with  ownership-in-industry — that  is  to  say,  those 
alone  found  now  within  any  actual  factory — would  be  solely 
responsible  for  whatever  production  might  take  place.  For 
it  is  our  actual  modern  agglomeration  of  factories  which  now 
produces  all  which  we  consume.  There  is  not  the  faintest 
glimmer  of  evidence  that  the  introduction  into  any  modern 


THE   BASIC   CONTRAST   IN   ECONOMICS  143 

factory  of  any  of  these  activities  inevitably  connected  with 
ownership-in-industry  would  enlarge  in  any  way  its  productivi- 
ties. 

For,  if  this  were  so,  then  our  actual  factory-owners  would 
long  ago  have  made  at  least  some  progress  toward  the  in- 
corporation within  their  factory-system  of  this  desirable  factor. 
But  not  only  has  no  progress  been  made  in  this  direction; 
their  whole  effort  is  actually  exerted  in  the  opposite  direction, 
to  effect  consolidations,  and  so  abolish  competing  ownerships- 
in-industry. 

Indeed,  if  any  inference  is  to  be  forced  upon  us  by  the  effi- 
ciencies resultant  from  the  various  sorts  of  industrial  effort, 
this  consolidation  of  industry,  with  its  reduction  of  antagonisms 
and  bettered  co-operation,  is  the  sole  thing  useful  which  the 
commercialists  do.  It  is  therefore  pertinent  to  note  that,  while 
and  in  so  far  as  they  do  it,  they  thereby  cease  to  be  commer- 
cialists, for  the  time,  and  become  productive. 

No;  the  productivity  of  our  existing  factory-system  plainly 
is  maintained  in  spite  of,  rather  than  by  aid  of,  all  activities 
in  ownership-in-industry.  All  which  it  may  produce  must  be 
the  result  of  those  activities  which  are  now  characteristic  of 
every  actual  factory  in  the  land;  and  these  activities  are  now 
everywhere  guarded — carefully,  jealously,  religiously  guarded 
by  our  capitalist-employers — from  any  taint  whatever  of  owner- 
ship-in-industry. 

The  Parasite  upon  Production. — Contrasted  with  these  fac- 
tory-like productive  activities,  in  our  imaginary  factory  per- 
meated with  ownership-in-industry,  there  would  be  a  whole 
array  of  vocations  devoted  purely  to  questions  of  ownership- 
in-industry — not  ownership  for  the  enjoyment  of  ultimate  con- 
sumption, which  is  the  sole  natural  and  beneficial  ownership, 
but  ownership-in-industry  maintained  for  the  sole  purpose  of 
collecting  tribute,  which  is  a  far  different  thing.  This  array 
of  vocations  would  inevitably  comprise  the  most  brilliant  minds 
and  the  ablest  characters  in  the  factory.  Its  pecuniary  rewards 
would  be  high.  Its  prestige  consequently  would  be  enormous. 

Either  through  fear  or  cupidity  it  would  everywhere  command 
obedience  and  assume  authority.  It  could,  and  inevitably  would, 
arrogate  to  itself  the  position  of  being  regarded  as  the  highest 
stratum  of  life  within  the  factory. 

Yet  from  our  better  informed  point  of  view,  knowing  orderly, 


144  MODERN   ECONOMIC   TENDENCIES 

co-operative,  efficient,  non-owning  factory-production  as  we  know 
it,  this  whole  array  of  antagonisms  and  duplications  of  effort 
over  ownership-in-industry  must  be  regarded  as  sheer  waste 
— a  gigantic,  dead-beat  bluff — parasitical  upon,  rather  than 
contributory  to,  the  real  productivity  of  the  factory,  and  de- 
serving not  one  iota  of  all  that  magnificence  which  was  partly 
contributed  to  it  voluntarily,  in  ignorance,  and  partly  arrogated 
to  itself  by  sheer  tyranny.  It  would  not  only  produce  nothing 
itself,  but  its  presence  would  so  seriously  interfere  with  the 
activities  of  those  anxious  to  produce  as  to  drop  the  output  of 
the  factory  to  some  very  small  fraction — certainly  not  over  one- 
tenth,  and  possibly  one-twentieth  or  one-fiftieth — of  normal. 

The  Employer's  Gospel. — There  is  no  class  of  public  opinion 
in  America  to-day  which  should  be  so  positive  and  unanimous 
in  corroborating  the  author,  as  to  this,  as  the  businessmen, 
capitalists  and  employers  of  labor.  For  there  is  not  a  factory- 
owner  nor  businessman  in  the  land  who,  upon  reaching  his 
factory,  store  or  office  some  morning  and  finding  that  over- 
night this  reversion  to  the  cottage-system  plan  of  ownership- 
in-industry  had  permeated  his  premises,  would  not  im- 
mediately denounce  the  whole  chaotic  mess  of  confusion,  cross- 
purposes,  undesired  multiplications,  delay,  antagonism  of  need- 
lessly egotized  interests,  injustice  to  productive  skill,  and 
ruination  of  aggregate  efficiency,  as  sheer  barbarism. 

He  would  promptly  call  in  the  police  and  clear  the  place  of 
every  professional  owner  and  sales-agent  on  the  premises,  and 
return  the  function  of  guiding  interchange  to  the  disinterested, 
salaried  hands  of  the  non-owning  Central  Office.  He  would 
promptly,  emphatically  and  finally  abolish  the  institution  of 
private  ownership-in-industry,  so  far  as  his  authority  extended, 
leaving  in  its  place  merely  the  long  familiar  factory-system. 

The  author  challenges  any  reader  to  procure  from  any  chamber 
of  commerce,  board  of  trade,  association  of  manufacturers  or 
other  society  of  businessmen  any  serious  refutation  of  this  posi- 
tion. All  that  he  demands  of  the  business-world  is  that  it 
shall  have  the  manhood  to  preach  what  it  everywhere  prac- 
tices. 

Industrial  Anarchy. — Does  any  reader  who  loves  law,  order 
and  efficiency  regard  it  as  too  strong  language  to  call  such  a 
chaos  of  artificial  antagonisms,  duplicated  efforts,  desertions 
from  the  ranks  of  production,  decisions  by  force  or  silliness 


THE  BASIC   CONTRAST  IN  ECONOMICS  145 

rather  than  by  reason,  guidance  l)y  short-sighted  individual 
avarice  rather  than  ~by  far-sighted  communal  selfishness,  and 
utter  waste  of  opportunities  as  that  of  our  imaginary  factory, 
"industrial  anarchy"  ? 

Is  it  other  than  common  sense,  from  the  most  practical 
standpoint  of  the  man  of  affairs,  to  call  the  combative  essence 
of  all  this  intricate  running  to  and  fro,  this  seeking  to  gain 
advantage  by  force  of  nerve  rather  than  by  activity  in  pro- 
duction, by  countervailing  another's  efforts  rather  than  co- 
operating with  them,  by  forcing  down  prices  which  are  to  be 
paid  and  forcing  up  prices  which  are  to  be  received,  "economic 
militarism"  ? 

Is  it  extreme  and  radical  "agitation,"  or  merely  fidelity  to 
truth,  to  call  "tribute"  those  moneys  paid  to  owners  who  de- 
liberately block  interchange  by  raising  prices,  until  they  have 
charged  "all  the  traffic  will  bear";  or  those  received  by  sales- 
agents  who  subconsciously,  but  just  as  effectively,  block  inter- 
change by  adding  to  the  natural  cost  of  production  (in  their 
retail-prices  to  the  Consumer)  the  manifold  costs  of  their 
haggling? 

Such  moneys  seem  to  the  author  just  as  plainly  tribute,  and 
exacted  for  precisely  the  same  reasons,  as  were  the  shameful 
sums  paid  by  the  United  States,  about  a  century  ago,  to  the 
governments  of  northern  Africa.  For  in  both  cases  the  tribute 
was  paid  merely  for  the  privilege  of  interchange  unmolested 
by  piracy.  Only,  when  we  paid  the  tribute,  a  century  ago,  to 
the  barbarians,  we  got  what  we  bought.  But  to-day,  when  we 
pay  it  into  the  commercial  maelstrom,  we  do  not. 

Or  it  may  seem  to  some  that  this  simile  of  a  modern  factory 
imaginably  permeated  with  ownership-in-industry  is  too  gro- 
tesque for  practical  force.  Yet  we  shall  see,  as  the  historical 
facts  are  investigated,  that  the  changes  indicated  in  this  sup- 
posititious case  have  been  more  than  paralleled  by  the  whole 
trend  of  American  conditions  throughout  the  last  seventy-five 
years.  Indeed,  this  inexpressible  inefficiency  of  our  illustration 
is  really  slight,  because  of  the  minor  scale  upon  which  the  model 
is  drawn,  when  compared  with  the  gross  inefficiency  now 
prevalent  throughout  our  land,  upon  a  national  scale,  merely 
because  no  premises,  no  buildings,  no  materials,  no  appliances, 
nor  any  opportunity  for  work  or  trade  whatever,  may  be  utilized 
by  the  community  for  its  life-support,  except  as  it  happens 


146  MODERN   ECONOMIC   TENDENCIES 

to  prove  selfishly  profitable  to  certain  individuals,  who  are  al- 
lowed to  "own"  them,  to  permit  it. 

The  Great  Economic  Question  of  the  Day. — The  question 
before  the  patriotic  student  of  American  internal  problems, 
therefore,  is  not  as  to  the  desirability  or  undesirability  of  own- 
ership-in-industry,  as  an  institution.  That  must  be  considered 
settled  by  the  unanimous  sentiment  of  every  employer  of  labor 
in  the  land.  The  sole  question  is  as  to  its  permanence.  What 
is  the  direction  of  its  growth — toward  disappearance,  or  toward 
exaggeration  ? 

Is  its  present  form  some  tattered  remnant  of  the  crude  cot- 
tage-system of  earlier  days,  which  we  have  inherited  from  the 
past  unwillingly,  but  of  which  we  are  ridding  ourselves  as 
rapidly  as  possible?  Or  is  ownership-in-industry  a  modern  in- 
stitution, new  in  economic  history,  which  we  have  developed 
out  of  modern  invention,  and  which  is  growing  upon  us  un- 
controllably with  time? 

Are  we  growing  ahead  of  it,  or  is  it  growing  upon  us  ?  Which 
way  are  we  headed?  That  is  the  prime  question  in  the  study 
of  American  economic  evolution.  That  is  the  question  to  which 
all  later  investigation  of  facts  herein  will  be  directed.  It  is 
not  the  momentary  facts  which  are  of  importance,  but  the 
direction  and  rate  of  our  motion. 

American  Caste. — But,  before  we  return  to  statistical  history 
it  should  be  noted  that,  so  far  as  the  opinions  of  the  man-in- 
the-street  are  concerned,  this  American  insistence  upon  owner- 
ship-in-industry, as  a  sacred  and  inviolable  prerogative,  does 
not  appear  to  the  candid  observer  to  be  any  less  of  a  national 
superstition  than  is  caste  in  India.  For  there  is  seldom  any 
disposition  to  reason  as  to  its  worth  or  unworth.  It  is  accepted 
quite  unthinkingly — and  then  enforced  as  rigidly  as  if  it  were 
a  part  of  our  national  constitution. 

The  same  men  who  enforce  non-ownership-in-industry  upon 
the  nine-tenths  of  the  whole  population  which  works  in  their 
factories  are  also  the  ones  responsible  for  the  maintenance 
and  defense  of  ownership-in-industry  among  themselves.  Their 
attitude  is  hopelessly  inconsistent  and  unreasoning.  If  we 
could  only  persuade  our  businessmen  to  preach  what  they  prac- 
tice, we  should  have  a  new  economic  system  in  no  time. 

The  sole  distinction  between  oriental  caste  and  this  na- 
tional American  economic  superstition  of  ours  is  that  caste  is 


THE   BASIC   CONTRAST   IN   ECONOMICS  147 

hereditary  and  inviolable,  whereas  owner ship-in-industry  is  not 
wholly  so.  American  commercialism,  however  founded  upon 
inconsistency  and  superstition,  is  not  a  caste,  nor  does  it  depend 
upon  anything  inherent  in  individual  character.  This  is  ob- 
vious because  every  day  thousands  of  individuals  are  crossing, 
in  both  directions,  the  invisible  line  between  the  productive  and 
combative  departments  of  economic  effort. 

On  the  one  hand  there  is  not  a  factory-department  to-day 
which  was  not,  ten  or  twenty  or  fifty  years  ago — assuming  that 
its  processes  have  been  that  long  in  existence — a  separately 
owned  enterprise.  There  is  not  a  day  passes  that  somewhere 
a  step  from  the  cottage-system  of  separate  ownership  toward 
the  factory-system  of  non-ownership  is  not  taken,  in  the  con- 
solidation under  common  ownership  of  what  before  were  sepa- 
rate properties.  Thus  does  separate  ownership-in-industry  dis- 
appear, and  factory-system  co-operation  takes  its  place. 

Nor,  on  the  other  hand,  is  there  a  day  slips  by  without  a 
step  being  taken  somewhere  in  the  opposite  direction,  toward 
separate  ownership-in-industry,  not  by  a  reversion  from  con- 
solidation to  disgregation,  but  by  the  injection  into  some  fairly 
unified  industry  of  a  new  and  intruding  novelty  due  to  inven- 
tion, multiplying  steps  in  manufacture  and  hence  disgregation 
in  ownership.  Thus  does  separate  ownership  arise  from  a  con- 
tinuous source,  decentralizing  industry  in  spite  of  concurrent 
consolidations. 

Invention  the  Economic  Perturbator. — For  invention  is  a 
prime  characteristic  of  the  day.  It  is  now  proceeding  at  a  rate 
higher  than  ever  before  in  history.  While  it  is  true  that  some 
invention  is  carried  on  professionally,  by  salaried  men  em- 
ployed by  the  larger  corporations  for  just  that  purpose,  yet 
the  majority  of  successful  inventions  arise  as  the  private 
property  of  the  inventor. 

Each  such  leads  to  the  formation  of  a  new  business-entity, 
built  upon  the  monopoly  inherent  in  the  patent.  Across  the 
increasingly  numerous  gaps  in  ownership  thus  created  between 
the  new  industry  and  the  old  ones,  interchange  must  be  effected 
as  best  it  may,  by  the  bargaining  methods  illustrated  in  con- 
nection with  the  imaginary  factory  poisoned  with  ownership- 
in-industry. 

The  Dual  Progress  of  Economic  Evolution. — Both  of  these 
processes:  (1^  The  aggregation  and  consolidation  of  separately 


148  MODERN   ECONOMIC   TENDENCIES 

owned  industries  into  unity  under  a  single  factory-system,  on 
the  one  hand,  and  (2)  the  disgregation  of  ownership  by  the 
creation  of  new  business-enterprises,  through  invention,  on  the 
other,  are  familiar  to  every  businessman.  Both  processes  are 
peculiarly  characteristic  of  American  economic  life.  Indeed, 
it  is  to  trace  the  comparative  evolution  of  these  two  processes 
in  American  economic  history  which  forms  the  chief  task  of 
this  book. 

But  by  some  freak  of  fortune  it  is  the  former  process  alone 
which  has  happened  to  catch  the  popular,  the  editorial  and  the 
sociological  eye,  in  the  past,  as  being  a  brake  upon  progress  and 
an  offender  against  justice.  It  is  this  which  has  led  to  the 
constant  clamor  against  "the  trusts,"  as  the  source  of  every 
economic  evil.  But  the  equal  or  greater  importance  of  the 
other  tendency  as  an  economic  destructant — the  choking  growth 
of  anarchic  commercial  competition  amongst  multiplying  hordes 
of  separate,  antagonistic  ownerships,  steadily  raising  prices — 
has  escaped  almost  without  notice. 

American  Economic  Evolution. — The  economic  history  of 
America,  then,  has  comprised  three  distinct  lines  of  advance. 
These  three  lines  must  be  accurately  denned  and  properly  re- 
lated in  mind  before  our  present  social  condition,  or  the  direc- 
tion in  which  we  are  trending,  may  be  correctly  understood. 
They  are: 

(1)  Invention,  considered  purely  as  a  mechanic  art. 

(2)  Continual  Decentralization  of  Ownership,  by  the  creation, 
through  this  invention,  of  new  businesses,  separately  owned,  be- 
tween which  and  all  previously  existing  concerns  interchange 
can  occur  only  by  the  methods  outlined  in  the  illustration  of  the 
imaginary  factory  permeated  with  ownership-in-industry. 

(3)  The  Gradual  Substitution  of  the  Non-ownership  Factory- 
system  for  the  Separate  Ownership  of  the  Cottage-system,  by 
Consolidation. 

Whereas  the  first  two  processes  depend  upon  individual  genius 
for  invention,  the  last  is  purely  a  matter  of  organization.  It 
prevails  wherever  inventions  can  be  used  independently  of  the 
inventors,  by  reason  of  either  the  expiration  or  the  purchase 
of  their  patent-rights.  It  is  the  usual  ultimate  result  of  com- 
mercial competition,  and  involves  often  thousands  of  inven- 
tions, new  and  old,  patented  and  unpatented,  within  the  single 
resultant  productive  unit. 


THE   BASIC   CONTRAST  IN  ECONOMICS  149 

The  relative  order  of  the  three  processes,  as  cause  and  effect, 
is  shown  in  the  order  of  their  statement.  Invention  creates 
decentralized  ownership.  Decentralized  ownership  leads  to 
ruinous  commercial  competition.  Commercial  competition  ends 
in  consolidation. 

Economic  Lag. — But  it  is  an  axiom  in  natural  science  that 
a  result  always  lags  behind  its  cause.  There  are  always  more 
inventions  being  created  than  can  ever  reach  the  status  of 
commercial  vitality.  There  are  always  more  disgregated  own- 
erships resulting  from  invention  than  can  be  consolidated  into 
unitary,  non-ownership  factory-systems.  Time  is  required  for 
results  to  follow  causes.  Therefore  the  process  of  centraliza- 
tion always  lags  behind  that  of  decentralization,  and  the  net 
result  is  a  relative  decentralization. 

This  general  statement  made  from  an  inductive  basis  will 
be  found  corroborated  by  the  facts  of  history.  To  anticipate 
some  later  quotations  from  statistics,  American  history  has 
revealed  activity  in  invention  as  its  prime  causative  character- 
istic. The  next  largest  of  its  great  departments  of  effort  is 
activity  in  questions  of  separate  ownership  (feeding  upon  this 
invention).  Trailing  after  these  come  its  various  other  depart- 
ments— factory-production,  technical  progress,  education,  reli- 
gion, charity,  etc.,  etc.  Startling  as  has  been  the  growth  of  the 
American  factory-system  or  of  American  technology,  the  growth 
of  American  commercialism  has  far  exceeded  them  both. 

Take,  for  example,  the  invention  of  the  automobile,  which 
was  not  controlled  by  basic  patent.  Its  adoption  has  brought 
together,  on  the  one  hand,  armies  of  skilled  mechanics  in  fac- 
tories of  a  size  and  perfection  of  organization  and  efficiency 
never  before  known.  But,  on  the  other  hand,  it  has  created  a 
hundred  new  business  entities  in  the  form  of  central  auto- 
mobile-factories, and  tens  of  thousands  of  smaller  independent 
concerns  each  manufacturing  or  selling  some  one  of  the  myriad 
of  tools  or  accessories  connected  with  the  automobile-trade; 
and  all  of  these  new  concerns,  big  and  little,  must  interchange 
with  each  other,  with  all  those  existing  before,  and  with  the 
Ultimate  Consumer,  by  bargaining  over  each  transfer  of  a 
screw-driver,  to  a  tremendous  expansion  of  all  that  sort  of 
activity  which  was  condemned  as  obviously  parasitical  in  the 
imaginary  factory.  A  whole  literature  would  be  required  to 
cover  this  single  field  of  progress. 


150  MODERN   ECONOMIC   TENDENCIES 

Consistency. — To  the  impartial  student,  witnessing  able  men 
of  affairs  carrying  order  and  efficiency  to  the  marvelous  degree 
visible  in  their  own  factories,  in  single  portions  of  the  auto- 
mobile-trade or  elsewhere,  it  is  incomprehensible  that  these 
same  men  should  never  have  attacked — by  word,  at  least,  if  acts 
are  impossible — that  nauseating  anarchy  of  dissociation,  an- 
tagonism, duplication  or  multiplication  of  effort,  unstandardized 
result  and  general  inefficiency  toward  the  Consumer,  which  is 
obvious  in  the  automobile-trade  considered  as  a  whole.  It  is 
still  less  comprehensible  that  they  should  never  have  recognized 
the  larger,  national  business-world  as  this  same  anarchy  ex- 
panded a  thousand  fold. 

Our  Compass-course. — Of  these  three  lines  of  social  advance 
mentioned  above,  it  may  be  assumed  that  the  first,  invention, 
is  wholly  beneficial.  The  entire  civilized  world  seems  to  be 
agreed  that  progress  in  invention  is  the  one  thing  most  to  be 
desired  and  encouraged;  and  in  this  doctrine  America  leads. 

But  because  invention,  and  increasingly  rapid  invention,  is 
involving  us  everywhere,  willy-nilly,  in  an  increasingly  puzzling 
tangle  of  these  two  other  processes  of  social  evolution,  it  be- 
comes necessary  to  examine  the  latter  most  carefully.  Which  of 
these  two  processes  dominates  the  other? 

Are  we  becoming  gradually  more  centralized  by  commercial 
consolidation,  or  are  we  becoming  more  rapidly  decentralized 
by  invention  ?  Are  we  drifting  toward  a  state  of  affairs  wherein 
our  national  problems  will  pivot  upon  the  tyranny  of  huge  com- 
binations of  capital,  as  so  many  believe  and  fear?  Or  is  the 
coming  crisis  to  be  one  characterized  by  a  congestion  of  a 
myriad  of  undigested  novelties,  in  an  anarchy  of  ultra-decen- 
tralized commercial  competition? 

The  wisdom  or  the  folly,  not  only  of  federal  legislation 
but  of  world-policies,  hinges  upon  the  facts  as  to  this  alternative. 
It  does  seem  as  if  the  question  deserved  better  attention  at  the 
hands  of  the  professional  sociologists  than  it  has  received.  The 
facts  are  not  difficult  of  access. 

Our  Growing  Minuend. — Of  course,  if  the  number  of  business- 
enterprises  in  a  land  were  fixed,  then  one  might  be  justified  in 
concluding,  because  consolidation  is  observed  on  every  hand, 
that  our  decentralization  must  be  diminished  by  this  subtrac- 
tion, that  our  ownership-in-industry  must  be  undergoing  reduc- 
tion by  concentration,  through  consolidation.  These  are  the 


THE  BASIC   CONTRAST  IN  ECONOMICS  151 

premises  universally  assumed  by  educated  people  and  profes- 
sional economists  to  be  the  truth. 

But  this  assumption  is  quite  without  foundation.  For  if, 
while  ten  businesses  are  being  consolidated  into  one,  a  hundred 
new  ones  are  formed,  wherein  lies  the  resultant  centralization 
of  enterprise,  and  hence  the  reduction  of  antagonistic  owner- 
ship-in-industry  ? 

Into  this  basic  question  no  entry  will  be  made  at  present, 
beyond  noting  its  importance,  and  that  modern  social  science 
leaves  it  unanswered.  The  prime  task  now  is  to  rid  the  field 
of  false  assumptions  and  prejudices,  to  clarify  and  define  ideas, 
and  thus  pave  the  way  for  an  intelligent  inquiry  later  as  to 
the  historical  facts. 

The  Modern  Factory-system.— The  true  factory-system,  then, 
becomes  visible  to  modern  eyes  as  the  productive  part  of  the 
primitive  cottage-system,  now  magnified  by  modern  tools,  power, 
transportation  and  communication,  but  simultaneously  purified 
of  all  owner ship-in-industry.  It  must  now  be  understood  as 
including  superintendence,  design,  invention,  interchange  and 
transportation,  as  well  as  mere  labor  at  bench  and  machine.  It 
must,  in  its  national  sense,  include  every  function  of  real  as- 
sistance to  the  life- support  of  the  Ultimate  Consumer. 

Therefore  in  its  national  aspect  it  must  also  include,  in  addi- 
tion to  the  unitary  factory  proper,  that  intangible  co-operation 
between  the  productive  forces  of  separately  owned  factories, 
the  selling-offices  of  which  may  be  in  active  antagonism.  For 
in  their  actual  interchange  of  goods  these  factories  do  co- 
operate, to  a  degree,  in  spite  of  the  hindrance  to  this  function 
due  to  the  commercial  competition  between  their  owners. 

In  order  to  realize  this  the  reader  must  recognize  that  the 
correlation  of  the  many  separate  factories  of  the  land  as  pro- 
ducers, interchanging  goods  and  services,  may  and  does  con- 
stitute one  distinct  organization  of  economic  energy — a  real, 
living,  energy-producing  entity — while  the  correlation  of  the 
selling-forces  of  those  same  factories  in  commercial  competition, 
as  distinct  business-enterprises,  does  actually  constitute  a  sepa- 
rate and  directly  contrasted  organization — or  disorganization. 
This  is  true  in  spite  of  the  fact  that  each  of  these  two  great, 
national,  parallel  fields  of  action  is  split  into  thousands  of 
nominally  separate  business-entities.  It  is  true  in  spite  of  the 
fact  that  many  a  businessman  may,  and  often  does,  shift  his 


152  MODERN  ECONOMIC  TENDENCIES 

activities  from  one  to  the  other  of  these  organizations  without 
leaving  his  chair.  We  are  engaged  in  classifying  not  individuals, 
but  activities. 

Leaving  the  second  of  these  two  great  organizations  of  social 
energy  for  discussion  in  the  next  chapter,  a  final  word  must  be 
given  in  emphasis  of  the  vital  importance  to  modern  life  of 
the  first :  that  great,  intricate,  international  network  of  organiza- 
tions of  individual  effort  which  alone  maintains,  through  what 
degree  of  co-operation  it  may  find  possible  under  commercial- 
ism, the  life-support  of  the  hundreds  of  millions  of  Ultimate 
Consumers,  namely,  the  Factory-system.  In  the  factory-system, 
in  this  broad  but  accurate  sense,  is  found  the  sole  source  of  all 
our  visible  material  growth  in  worldly  prosperity,  and  the  main 
source  of  advance  in  knowledge,  or  even  spiritual  power;  for  it 
is  by  means  of  the  factory-system  alone  that  those  intellectual 
and  spiritual  springs  of  inspiration,  which  are  likely  always  to 
remain  individual  in  character,  find  adequate  communication, 
through  books,  periodicals,  schools,  lectures,  etc.,  with  the  mil- 
lions which  they  otherwise  could  not  reach. 

As  we  have  progressed  from  the  days  of  hand-looms,  dip- 
candles  and  hand-cut  nails  to  those  wherein  a  nail  is  no  longer 
worth  picking  up  when  dropped,  the  gradual  adoption  of  this 
wonderful  modern  factory-system  has  permitted  the  countries 
employing  it  to  multiply  in  population  like  rabbits,  and  their 
creature-comforts  to  increase  in  dazzling  ratio.  There  is  no 
other  method  of  organizing  industrial  effort  yet  known,  nor 
even  suggested,  which  is  comparable  with  it  in  efficiency.  Every- 
thing which  we  now  enjoy  we  owe  to  the  factory- system. 

Economic  Motive-forces. — Yet  this  wonderful  factory-system, 
it  is  noted,  is  quite  devoid  of  any  other  incentive  to  industry 
than  wages  or  salaries — or  royalties  or  fees  which  are  merely 
disguised  wages.  The  same  is  true  as  to  all  interchange  within 
the  factory-system.  All  of  its  functions  proceed  most  actively 
when  promoted  only  by  the  natural  human  desire  to  get  a  thing 
done,  for  the  natural,  life-supporting  value  thereof,  rather  than 
by  any  desire  for  pecuniary  advantage  over  a  fellow. 

It  is  indubitable  from  all  this  unvarying  evidence,  coming 
from  our  most  active  and  gigantic  field  of  production  and  in- 
terchange— that  field  which  comprises  nine-tenths  of  all  our 
active  population,  and  which  alone  produces  all  which  we  now 
consume  and  enjoy — that  the  mere  natural  desire  to  inter- 


THE   BASIC   CONTRAST  IN   ECONOMICS  153 

change,  for  biological  rather  than  pecuniary  reasons,  is  a  motive 
force  quite  sufficient  to  promote  the  act.  No  advertising  nor 
hawking  of  any  sort  is  found  requisite,  in  a  factory,  for  getting 
a  pattern  into  the  foundry,  or  a  completed  chair  into  the  varnish- 
shop. 

The  factory-system,  too,  never  makes  any  appeal  to  ambition 
for  riches,  because  riches  are  virtually  never  gained  through 
salary  or  wages  for  productive  effort,  but  only  through  profits 
or  dividends  won  by  commercial  combat.  It  makes  no  appeal 
to  enterprise  or  "initiative,"  in  the  sense  of  starting  some  new 
scheme  for  the  exaction  of  additional  profits  or  dividends  from  the 
Ultimate  Consumer ;  for  all  such  enterprise  it  sternly  outlaws,  as 
destructive  of  efficiency  of  aggregate  results.  Its  vigor  and  fer- 
tility and  progressiveness  rest  solely  upon  the  one  hand,  upon 
that  love  of  craft  which  is  inherent  in  every  human  being,  and 
which  will  emerge  productively  whenever  assurance  prevails  of 
an  individual  reward  even  approximating  the  value  produced  for 
society.  It  rests,  upon  the  other  hand,  upon  that  endless  demand 
of  the  Ultimate  Consumer  for  life-support,  which  must  ever 
grow  endlessly  upon  what  it  receives. 

Profit-sharing. — Not  even  the  microscopic  prevalence  of  the 
profit-sharing  plan,  when  properly  analyzed,  stands  in  nega- 
tion of  this  statement;  for  no  profit-sharing  plan  yet  pro- 
posed has  ever  gone  to  the  extent  of  incurring  the  slightest 
danger  that  the  "hands"  might  share  sufficiently  in  the  stock 
to  control  the  fight  for  profits  and  dividends.  The  control,  and 
therefore  the  lion's  share  in  the  profits,  has  always  been  kept 
safely  in  commercial  hands.  There  was  never  any  intention 
that  it  should  be  otherwise. 

The  profit-sharer  is  merely  a  minority-stockholder,  upon  the 
smallest  conceivable  scale;  and  the  minority-stockholder  is  in- 
creasingly being  recognized  as  a  cat's-paw  class,  which  loses  at 
the  commercial  game  almost  as  hopelessly  as  does  labor.  This 
fact  labor  is  beginning  to  appreciate.  It  is  beginning  to  realize 
that  it  is  better  off  as  undisguised  labor  than  it  is  as  a  profit- 
sharer — a  sexless  mixture  of  emasculated  labor  •  with  barren 
capitalism. 

Moreover,  even  if  this  impossible  extreme  where  the  profit- 
sharer  might  imaginably  control  the  business  were  ever  seriously 
contemplated  and  adopted,  as  is  sometimes  true  in  so-called 
co-operative  societies,  it  would  not  amount  to  any  slightest  an- 


154  MODERN   ECONOMIC   TENDENCIES 

nulment  of  the  contrast  between  production  and  commercial- 
ism which  forms  our  text.  Labor  would  thereby  merely  have 
come  to  mingle  within  a  single  individual  portions  of  two  con- 
trasted sorts  of  activity,  as  is  true  of  so  many  officials  of  manu- 
facturing corporations.  The  profit-sharing  wage-earners  would 
thereby  merely  have  ceased,  temporarily,  to  be  out-and-out 
producers,  by  becoming  partners  in  the  commercial  fight  for 
dividends,  just  as  the  corporation-official  sometimes  drops  his 
combat  for  profits  to  give  a  bit  of  attention  to  production. 

Neither  of  them  has  thereby  altered  in  any  slightest  degree 
the  ineradicable  characteristics  of  either  the  factory-system  or 
the  ownership-in-industry  system,  by  their  momentary  shift 
from  one  to  the  other.  The  profit-sharer  would  merely  have 
abandoned  the  former,  for  the  moment,  as  so  many  are  doing 
in  a  myriad  of  ways  all  the  time,  to  increase  the  latter  by  their 
joining  somewhat  in  its  more  lucrative  occupation  of  fighting 
over  the  spoils.  And  thereby  they  must  inevitably  make  both 
themselves  and  everyone  else,  on  the  average,  poorer,  by  reduc- 
ing the  purchasing-power  of  every  dollar  in  the  land. 

Summary. — The  factory-system,  instead  of  relying  upon  those 
methods  of  appeal  to  the  Consumer  to  exchange  his  money  for 
goods,  or  to  the  capitalist  to  supply  the  appliances  needed  by 
labor,  which  are  so  familiar  in  the  commercial  world,  provides 
merely,  instead,  for  the  universal  privilege  of  use  of  all  its 
facilities  by  any  of  its  members,  under  proper  superintendence, 
without  other  charge  than  for  depreciation,  and  without  im- 
portunity. It  proffers  to  every  workman  the  enjoyment  of  every 
appliance  which  he  is  fit  to  use,  upon  virtually  unlimited  credit. 
But  it  never  permits  him  to  own  it. 

It  also  establishes  ideally  free  interchange  of  materials,  with- 
out negotiation  as  to  price  as  a  preliminary,  under  the  guiding 
agency  of  a  Central  Office.  Yet  this  Central  Office  itself  never 
negotiates.  It  merely  transmits  from  the  Ultimate  Consumer 
to  the  original  producer  (or,  in  the  existing  factory,  so  far  in 
this  direction  as  its  jurisdiction  may  extend),  and  vice  versa, 
the  will  of  each. 

By  this  Central  Office  the  willingness  of  the  producer  to  labor 
is  transmitted,  to  the  person  who  next  receives  his  output,  in 
a  form  containing  no  tax  beyond  the  clerical  cost  of  trans- 
mission. Word  as  to  the  volume  of  goods  acceptable  to  the 


THE  BASIC   CONTRAST  IN  ECONOMICS  155 

Consumer  goes  back  to  the  producer  in  a  similarly  efficient 
manner. 

These  unhampered  privileges  of  use  and  interchange  have 
been  maintained  so  long  before  us,  as  natural  essentials  to  the 
welfare  and  efficiency  of  the  little  community  within  every 
factory,  that  we  have  become  unconscious  of  their  presence, 
their  value  and  their  significance.  Although  they  are  diametric- 
ally opposed,  in  principle,  to  the  spirit  of  the  entire  business- 
world,  yet  their  right  has  never  been  questioned  by  any  busi- 
nessman, but  has  been  upheld  in  fact  by  all. 

Yet  the  factory-system  seems  to  have  failed  completely  in 
public  recognition,  through  our  official  agents  for  such  matters — 
the  university-economists  and  the  journalists — of  these  its  four 
most  important  lines  of  value,  namely: 

(1)  A  system  in  which  ownership-in-industry  is  everywhere 
prohibited ; 

(2)  One  in  which  monopoly  is  everywhere  enforced;   and 

(3)  One  where  credit  is  universally  extended  without  in- 
terest-charge; yet 

(4)  One  where  the  volume,  rate  and  ease  of  production,  inter- 
change and  improvement  of  goods  reaches  the  maximum  known 
to  human  experience. 

Our  Factory-system  Incomplete. — It  is  obvious,  too,  that  a 
wide  extension  of  our  factory-system,  into  fields  and  popula- 
tions now  strange  to  it,  is  possible.  In  view  of  the  predominant 
proportion  of  the  nation's  activities  which  are  now  being 
absorbed  in  questions  of  ownership-in-industry,  it  is  plain  that 
such  an  extension  might  be  made  to  include  much  of  the  best 
human  material  which  we  possess,  which  is  now  going  to  waste 
in  business-offices. 

Indeed,  the  aim  of  this  entire  chapter  has  been  to  suggest 
that  the  proportion  of  what  factory-system  we  now  enjoy,  rela- 
tively to  that  which  we  might  just  as  well  enjoy,  is  the  same 
as  that  between  the  productive  and  the  total  energies  respectively 
in  our  imaginary  modern  factory  permeated  with  ownership- 
in-industry.  This  ratio,  judging  superficially,  cannot  be  less 
than  several  fold,  and  easily  may  be  ten  or  twentyfold.  This 
ratio,  it  is  to  be  remembered,  is  not  one  of  populations,  but  of 
energies. 

Discontent. — Along  with  the  incalculable  gains  to  society  as 
a  whole  which  have  resulted  from  the  adoption  of  the  factory- 


156  MODERN  ECONOMIC  TENDENCIES 

system,  there  has  also  been  a  simultaneous  growth,  it  is  true, 
of  a  worldwide,  obvious  and  increasing  discontent  among  those 
working  under  it.  But  further  analysis  is  needed  before  re- 
sponsibility for  this  may  be  properly  placed. 

In  the  first  place,  this  discontent  is  shared  by  millions  living 
outside  the  factory-system.  In  the  second  place,  if  the  factory- 
system  has  grown  enormously,,  so  also  has  the  unsystematic 
fabric  of  contentious  owner ship-in-industry — and  the  latter,  we 
shall  see,  at  an  even  higher  rate. 

There  is  no  a  priori  reason  why  all  social  ills  or  labor-dis- 
content should  be  attributed  to  one  rather  than  to  the  other 
of  these  diametrically  opposed  systems.  Surely,  if  the  former, 
on  its  face,  is  productive,  while  the  latter  is  destructive — and 
if  both  are  growing  fast,  but  the  latter  faster — it  is  more  natural 
to  place  responsibility  upon  the  latter,  until  some  opposite  be 
proven. 

In  the  following  chapters  the  contrast  in  character  between 
these  two  inevitable  results  of  modern  mechanical  invention — 
the  non-owning  factory-system  and  the  ownership-in-industry 
unsystem  respectively — will  be  traced  further  in  detail.  But, 
however  deeply  such  a  search  may  penetrate  the  labyrinths  of 
modern  industry  and  commerce,  it  must  never  be  forgotten, 
amidst  the  distractions  of  intricate  detail,  that,  however  proper 
may  be  the  institution  of  private  ownership  in  its  proper  sphere 
— ITltimate  Consumption — yet  that  ownership-in-industry  is  the 
direct  opposite,  in  nature  and  result,  of  production.  It  is  not 
itself  productive;  it  lives  only  as  a  parasite  upon  production. 

This  fact  may  not  be  questioned  by  any  businessman,  and 
least  of  all  by  any  manufacturer  or  employer  of  labor;  because 
every  one  of  these,  without  even  a  single  exception,  rigidly 
excludes  personal  ownership  of  tools,  raw  materials  or  produce, 
and  all  commercial  competition,  from  all  the  industry  over 
ivhich  he  exercises  control.  This  is  as  true,  too,  of  the  banker, 
the  promoter  or  the  sales-manager  who  has  only  a  few  book- 
keepers or  stenographers  in  his  working-force,  or  of  the  merchant 
having  only  a  single  "clerk"  or  a  few  hundred  shop-girls,  as  it 
is  of  the  owner  of  the  largest  factory,  the  deepest  mine  or  the 
longest  railway,  controlling  tens  of  thousands  of  men  in  overalls. 

The  Basic  Contrast  Running  through  All  Energetic 
Sciences. — This  contrast  between  industry-without-ownership,  as 
in  the  factory-system,  and  ownership-in-industry,  as  universal 


THE   BASIC   CONTRAST   IN   ECONOMICS  157 

throughout  the  commercial  world,  is  the  basic  one  in  economics. 
It  is  only  by  means  of  this  contrast  that  a  path  may  be  blazed  into 
the  deepest  mysteries  of  the  subject.  It  is  only  by  planting 
our  feet  firmly  upon  this  basic  distinction  that  we  may  acquire 
a  real  science  of  social  energetics,  fit  to  stand  side  by  side  with 
the  other  energetic  sciences  and  able  to  predict  future  events 
as  they  predict  them — foretelling  a  war  or  revolution  as 
accurately  as  astronomy  foretells  an  eclipse,  or  gauging  a  yet 
unbuilt  conformation  of  society  as  nicely  as  we  now  estimate 
the  performance  of  an  unlaunched  steamship. 

To  readers  who  are  scientifically  inclined  this  definition  of 
the  field  of  scientific  sociology  may  be  supported  by  the  ex- 
planation that,  in  this  now  formative  science  of  social  energetics, 
this  contrast  between  production  and  commercialism  plays  the 
same  basic,  distinctive  and  guiding  part  as  that  between  the 
two  opposed  factors — conservative  and  dissipative  respectively — 
which  give  to  every  natural  science  its  dual  aspect.  Such 
a  basic  dual  contrast,  for  instance,  is  that  between  elas- 
ticity and  impact  in  the  science  of  mechanics  of  solids,  or  be- 
tween fluidity  and  viscosity  in  hydraulics  and  pneumatics,  or 
between  conductivity  and  resistance  in  electricity,  or  between 
translucence  and  opacity  in  radiation,  or  between  adiabatic 
and  isothermal  in  heat-action,  or  that  between  reversible  and 
irreversible  changes  in  any  cyclical  activity  whatever,  or  that 
between  the  broader  principles  of  conservation  and  degradation 
in  cosmic  energetics,  or  that  between  peace  and  war  in  politics 
— that  fundamental  contrast  which  pervades  every  corner  of 
the  universe,  which  runs  through  all  the  natural  sciences,  which 
forms  the  guide  for  every  effective  laboratory-investigation,  and 
which  has  led  reliably  to  the  solution  of  the  most  difficult 
problems,  in  each  line  of  technical  progress,  which  have  been 
solved  in  recent  years. 

Therefore  from  this  point  forward  it  will  be  assumed  that 
political  economy,  if  it  is  really  to  aspire  to  a  peerage  with 
the  other  natural  sciences,  in  its  foundation  not  only  upon 
statistical  fact  but  upon  scientific  principles  relating  fact  with 
fact,  and  if  it  be  ambitious  to  acquire  that  ability  to  predict 
which  is  the  test  of  accuracy  and  reliability  in  every  other 
science,  then  it  must  start  from,  be  based  upon  and  guided  by 
this  pame  contrast — that  between  conservative  and  dissipative 
activities — which  underlies  all  human  knowledge  of  energy  and 


158  MODERN   ECONOMIC   TENDENCIES 

action.  The  only  precaution  needed  is  to  define  carefully  for 
the  special  field  of  social  energetics.  Although  what  follows 
may  confine  itself  to  simple,  concrete,  economic  facts,  yet  this 
high  goal  is  the  real  end  in  view. 

At  this  point,  therefore,  the  reader  must  select  his  allegiance 
and  nail  his  colors  to  the  mast.  If  he  has  followed  and  ac- 
cepted, in  the  main,  this  distinction  between  the  crude  anarchy 
of  the  cottage-system — ownership-in-industry — on  the  one  hand, 
and  the  efficiency  of  the  orderly,  co-operative,  non-owning  fac- 
tory-system on  the  other,  as  the  basic  one  between  inefficiency 
and  efficiency,  between  archaic  crudity  and  rational  progress, 
then  let  him  proceed  in  this  book.  But  if  he  has  failed  in  this 
he  might  as  well  stop  here.  For  the  rest  of  this  work  is  naught 
but  a  careful  investigation  of  the  relative  growth  in  past  Ameri- 
can history,  and  the  relative  bearing  upon  present  problems, 
of  these  two  huge  and  basically  contrasted  divisions  of  interna- 
tional economic  effort. 


CHAPTER  VII 

THE    MARKET-SYSTEM,   OR    COMMERCIALISM 

THE  modern  market-system  is  a  creature  born  primarily  of 
modern  transportative  and  communicative  facilities.  These  have 
extended  inconceivably  the  radius  of  action  of  not  only  every 
productive  center,  but  also  of  every  selling-agency;  and  the 
populations  thus  affected,  we  know,  must  have  increased  even 
more  rapidly  than  the  square  of  this  radius. 

Simultaneously  invention  has  multiplied  inconceivably  the 
number  of  steps  in  the  productive  processes  of  our  factory- 
system.  At  every  one  of  these  rapidly  growing  number  of 
steps  of  manufacture,  and  then  of  distribution  to  the  multi- 
millions  of  Ultimate  Consumers,  interchange  and  transporta- 
tion must  enter  as  a  factor;  and  at  every  one  of  these  in- 
numerable steps  in  transportation,  and  often  when  no  trans- 
portation is  involved,  negotiation  over  price  is  necessitated  by 
change  in  ownership. 

For  instance,  each  bushel  of  wheat  passing  through  the  port 
of  New  York  is  said  to  be  bought  and  sold  over  one  hundred 
times.  Yet  think  of  the  number  of  similar  transportative  steps 
involved  in  getting  the  \tfieat  from  farm  to  bread-eater — in- 
cluding the  many  sales  of  the  emery  with  which  is  ground  the 
valves  of  the  steam-driven  mixing-machinery  of  the  modern 
bakery,  and  every  similarly  remote  accessory — as  compared  with 
the  simplicity  of  the  neighborhood-mill  and  the  domestic  oven 
of  a  century  ago.  And  at  each  of  these  steps  may  occur  a 
multiplication  of  negotiations.  Follow  this  picture  through  all 
the  intricacies  of  corporation-law  and  patent-litigation  involved 
in  this  myriad  of  technical  processes,  and  you  may  approach 
some  faint  conception  of  the  ramifying  energy  of  the  modern 
market-system. 

Transportation  and  Communication. — Glance  for  a  moment 
at  the  modern  market  of  Ultimate  Consumers,  as  contrasted 
with  that  of  a  century  ago.  Relatively  speaking,  in  1815  there 

159 


160  MODERN   ECONOMIC   TENDENCIES 

was  no  transportation  of  commodities  except  by  water,  and 
that  at  great  risk,  with  wagon-traffic  a  remote  second.  Goods 
must  find  a  market  near  their  origin  or  else  must  remain 
unconsumed. 

A  century  ago  manufacturing-processes  were  exceedingly 
simple.  Therefore  materials  went  through  only  one  or  a  few 
transfers  of  ownership  between  raw  source  and  ultimate  con- 
sumption. Moreover,  there  was  but  a  slender  variety  of  choice 
in  the  goods  offered  for  sale,  or  of  choice  between  purveyors. 
The  Consumer  either  bought  what  was  offered  by  his  nearest 
shop-keeper,  or  the  first  pedlar  to  pass,  or  else  went  without — 
or  made  it  at  home. 

Production,  then  unaided  by  invention  and  power,  was  slow 
and  difficult.  It  absorbed  the  bulk  of  the  energy  available. 

Selling,  on  the  other  hand,  equally  unaided  by  invention, 
unstimulated  by  variety  of  goods,  shackled  by  lack  of  means 
for  communication,  and  unenticed  by  modern  congestion  of 
population,  absorbed  little  effort.  Energy  devoted  to  selling 
did  not  pay.  The  Ultimate  Consumer  was  either  found  im- 
mediately, or  else  the  search  was  abandoned. 

Now,  on  the  other  hand,  these  conditions  have  been  reversed 
to  an  almost  inconceivable  degree.  Transportation  spreads 
commodities  over  wide  ranges  of  territory,  reaching  enormous 
masses  of  population.  Cold  storage  has  annihilated  the  sea- 
sonal limitations  of  many  goods.  From  the  window,  as  I  write, 
can  be  seen  on  a  clear  day  the  homes  of  more  people  than 
were  to  be  reached  by  three  weeks  of  travel  in  all  directions 
in  1800.  By  the  telephone  at  my  elb«w  I  can  talk  to  a  popula- 
tion larger  than  that  of  the  entire  civilized  world  when  Adam 
Smith  wrote  his  "Wealth  of  Nations." 

Both  transportation  and  communication  have  multiplied  in- 
conceivably the  variety  of  commodities  subject  to  the  cus- 
tomer's choice,  and  have  thus  made  immeasurably  more  profit- 
able the  devotion  of  effort  to  influencing  that  choice.  In  no 
field  has  invention  been  so  active — perhaps  because  nowhere 
else  so  artificially  profitable — as  in  the  fields  of  communication 
and  display,  which  are  the  salesman's  especial  aids  in  the  in- 
fluence of  trade  over  a  wide  market. 

The  Line  between  Production  and  Commercialism. — So, 
between  this  obvious  and  unavoidable  necessity  for  reaching 
myriads  of  remotely  scattered  Consumers  with  information 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  161 

as  to  goods,  coining  in  the  greatest  variety  from  numerous  and 
unsystematized  sources — which,  when  reduced  to  its  lowest  terms, 
is  a  productive  task — and  the  equally  obvious  destructiveness 
of  personal  ownership-in-industry,  or  commercialism,  when  in- 
troduced into  the  factory-system — where  is  the  dividing  line? 
Which  is  the  real  and  productive  factory-system,  and  which  the 
unnecessary,  destructive  market-system? 

Demand  Unlimited. — In  considering  this  question  the  prime 
fact  to  be  kept  in  view  is  that  the  Ultimate  Consumer  always 
desires  to  consume.  He  needs  no  inducement  whatever.  There 
is  no  limit  to  human  desire.  There  is  a  limit  to  the  people's 
purchasing-power,  it  is  true — a  factor  which  will  be  considered 
later — but  none  to  their  desire. 

The  shoe-salesman,  for  instance,  starts  out  into  a  world  where 
everyone  wants  more  or  better  shoes.  Yet  it  seems  to  require 
a  gigantic  organization, .  backed  with  ample  capital  and  trained 
by  specialists  in  salesmanship,  in  order  to  persuade  the  people 
to  buy  that  which  they  keenly  desire !  For  many  who  attempt 
to  sell  excellent  shoes  fail.  There  is  some  deep  paradox  here. 
.  But  consider — if  there  were  not  a  shoe-salesman  in  existence 
would  the  people  go  barefoot?  Is  there  a  human  being  with 
so  little  enterprise  that,  being  ill  shod,  he  would  not  step  into 
a  shoe-store  without  the  enticement  of  alluring  lights  and 
gaudy  signs  to  draw  him  thither?  If  there  were  no  shoe-shops 
at  all  would  not  the  Consumers  go,  or  collectively  send  a  dis- 
interested agent,  to  bring  shoes  from  the  factory? 

Would  there  then  be  even  a  single  pair  of  shoes  less  than 
now  in  use?  Indeed,  is  it  not  possible  that,  if  shoes  could  be 
had  at  factory-costs,  without  the  far  greater  cost  of  selling, 
there  would  then  be  even  many  more  shoes  bought — and  there- 
fore made,  sold  and  worn — than  now? 

For  when  one  learns  what  a  large  proportion  of  the.  price  of 
shoes  is  mere  selling-cost,  and  when  one  recalls  that  all  the 
money  available  for  spending  is  going  to  be  spent  anyhow,  even 
if  no  clever  salesman  entices,  then  it  becomes  clear  that  that 
money  would  buy  many  more  shoes  than  now,  if  only  the 
selling-cost  were  omitted  from  the  price. 

Of  course,  if  the  salesmen  who  sell  shoes  alone  went  out  of 
existence,  leaving  the  salesmen  in  all  the  other  lines  at  work, 
then  the  shoe-factories  would  suffer.  The  Consumer's  money 
would  then  be  diverted  away  from  shoes  to  some  other  com- 


162  MODERN   ECONOMIC   TENDENCIES 

modify,  even  to  the  point  of  poorly  shod  feet  as  the  price  of 
needless  purchases  elsewhere. 

For  clever  salesmanship  is  a  real  hypnotic  power.  It  is  a 
common  phenomenon  for  it  to  induce  purchases  which  are  not 
really  desired  by  the  Consumer.  But  it  cannot  possibly  expand 
the  aggregate  volume  of  purchases,  for  that  is  determined  not 
at  all  by  psychic  desire,  whether  natural  or  induced,  but  solely 
by  aggregate  pecuniary  pur  chasing -power. 

All  the  money  available  for  spending  will  be  spent  anyhow,  sales- 
men or  no  salesmen.  Therefore  if  all  salesmen  were  outlawed 
simultaneously,  by  a  universal  adoption  of  the  factory-system, 
then  interchange  and  consumption  would  be  distributed  among 
commodities  very  much  as  now,  except  that  the  volume  in  all 
lines  would  be  very  much  greater  than  now. 

Ultimate  versus  Intermediate  Consumption. — The  Ultimate 
Consumer,  when  he  buys,  usually  buys  only  what  he  actually 
desires  or  really  needs.  The  burden  of  conducting  purchases 
of  that  sort  is  a  necessary  and  productive  task,  in  so  far  as  it 
is  not  artificially  exaggerated  by  the  presence  of  ownership- 
in-industry,  multiplying  unnecessarily  the  number  of  retailers. 

But  under  the  commercial  system  the  bulk  of  all  buying  and 
selling  is  not  of  this  sort.  It  is  not  done  by  Ultimate  Consumers, 
but  by  manufacturers  or  re-sellers.  It  has  nothing  to  do  with 
the  desires,  personal  needs  nor  Ultimate  Consumption  of  the 
buyers.  It  is  undertaken  solely  in  order  to  reap  a  personal 
pecuniary  profit. 

Purchases  of  commodities  are  made  not  to  enjoy  or  consume 
them,  but  only  to  sell  again.  Purchases  of  securities  are  made 
solely  for  the  purpose  of  drawing  interest  or  dividends.  The 
burden  of  conducting  all  these  sales  and  purchases,  which  is  a 
heavy  one  to  society,  is  an  unmitigated  waste. 

It  is  irrelevant  to  reply  to  this  that  unless  the  Ultimate 
Consumer  wishes  an  article  it  is  worth  nothing  to  the  middle- 
man. If  the  movement  of  goods  were  stimulated  and  guided 
solely  by  the  desires  of  the  Ultimate  Consumer,  they  would 
move  from  the  original  factory  directly  toward  him,  along  the 
shortest  possible  path. 

But  the  facts  are  far  from  this.  Goods  now  move  toward 
their  Ultimate  Consumer  not  so  directly  as  a  sailing-ship  tack- 
ing to  windward  approaches  her  port;  and  we  all  know  how 
satisfactory  that  is  to  modern  standards  of  speed  and  efficiency. 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  163 

Then,  as  a  matter  of  fact,  the  intermediate  commercial  buyer 
needs  have  no  appreciable  regard  for  the  question  of  ultimate 
consumption.  The  sole  question  for  him  is:  "Can  I  find  a 
man  who  believes  more  than  I  do  that  there  will  be  an  ultimate 
demand  for  these  goods,  or  that  they  may  be  made  to  command 
a  higher  price  than  I  believe?  If  so  I  can  sell  them  to  him 
at  a  proft." 

But  if  it  then  turns  out  that  the  second  man  was  mistaken, 
it  does  not  follow  that  he  loses  what  the  first  man  won,  the 
Consumer  paying  only  the  natural  price  which  would  have  been 
paid  if  neither  of  these  men  had  entered  the  market.  Instead, 
the  second  man  says :  "A  man  must  live.  If  I  make  a  mistake 
now  and  then  I  must  still  average  a  net  profit."  So  he  tucks 
upon  whatever  goods  he  succeeds  in  selling  a  profit  sufficient 
to  cover  his  losses  upon  those  which  he  cannot  sell,  and  ex- 
plains the  whole  as  "the  cost  of  handling  the  goods" — forgetting 
that  nobody  ever  asked  him  to  handle  the  goods,  that  he  has 
had  to  hustle  in  order  to  secure  a  chance  to  handle  them,  and 
that  the  Consumer,  who  pays  all  the  bills,  would  be  vastly  better 
off  if  he  ceased  handling  them  altogether. 

As  for  the  Consumer,  he  is  helpless.  Any  refusal  on  his 
part  to  buy  of  any  such  an  insane  arrangement  merely  leaves 
him  the  alternative  of  buying  from  another  equally  bad.  The 
Ultimate  Consumer,  in  this  game  of  commercial  buying  and 
selling  without  the  natural  cause,  is  like  a  base-runner  caught 
between  bases,  with  the  basemen  trading  the  ball  back  and 
forth  over  his  head.  They  may  make  as  many  passes  back  and 
forth  as  they  choose — all  to  their  pleasure  and  his  ultimate 
discomfiture. 

For  every  profit  on  every  transaction  is  charged  up  to  the 
Ultimate  Consumer.  He  must  either  pay  or  starve.  The  bulk 
of  all  commercial  transactions,  including  not  merely  middle- 
men's speculations  but  all  such  variety  of  commercial  and 
financial  ventures  as  the  starting  of  additional  retail-stores, 
founding  new  advertising-mediums,  launching  new  brands  of 
old  goods,  with  all  the  financial,  legal  and  negotiative  com- 
plications attendant  thereon,  are  all  conducted  to-day  not  at 
all  because  the  Ultimate  Consumer  who  pays  for  them  either 
desires  or  needs  them,  but  solely  for  the  sake  of  the  profits 
incidental  to  charging  up  to,  and  collecting  from,  him  all  those 


164  MODERN   ECONOMIC   TENDENCIES 

unwelcome  costs,  in  the  form  of  mysteriously  rising  retail- 
prices. 

Outline  of  the  Market-system.— The  market-system  thus  com- 
prises all  economic  effort  which  is  not  productive  in  the  sense 
of  supporting  the  life  of  the  Ultimate  Consumer.  It  concerns 
all  sales  and  purchases  not  needed  by  the  Ultimate  Consumer. 
It  includes  all  diversion  of  energy  into  questions  of  ownership, 
price,  markets,  profits  or  opportunities  for  sale,  or  those  neces- 
sitated by  duplication  of  effort  due  to  the  present  anarchic 
license  of  any  man  to  enter  any  commercial  field  which  may 
seem  attractive  to  him,  regardless  of  the  interests  of  him  who 
must  pay  all  the  costs  thereof,  the  Ultimate  Consumer. 

The  sole  exception  to  this  definition,  which  blocks  the  way 
to  making  it  sweepingly  inclusive  of  all  selling,  is  that  effort 
which  must  inevitably  be  put  forth,  even  under  a  nationally 
complete  factory-system,  by  salaried  salesmen  each  possessing 
a  complete  monopoly  in  his  own  line  and  district,  in  order  to 
guide  the  Ultimate  Consumer  competently  toward  a  wise  choice 
amongst  all  the  commodities  produced  in  that  line,  all  of 
which  are  presented  for  choice  simultaneously  and  impartially. 
But  this  is  a  very  small — a  barely  perceptible — fraction  of 
modern  selling-effort. 

For  under  even  the  most  perfect  system  the  Ultimate  Con- 
sumer needs  to  be  guided  and  informed.  Under  any  imaginable 
system  accumulations  of  goods  must  be  maintained  for  his  in- 
spection, or  to  tide  over  seasons  of  surplus  or  famine.  These 
are  natural,  inevitable  functions.  Therefore,  in  so  far  as  the 
retailers  now  actually  perform  these  functions,  as  they  would 
be  performed  by  a  national  factory-system,  just  so  far  they  do 
now  form  a  part  of  our  actual,  if  incomplete,  factory-system. 

But  on  the  other  hand,  to  whatever  degree — and  it  is  a  major 
degree — they  now  waste  space,  buildings,  time  and  the  energy 
of  the  public  seeking  commodities,  by  their  maintenance  of  a 
myriad  of  trivial  little  stocks,  each  one  incomplete  and  un- 
systematized  with  the  others,  or  unwisely  chosen  as  to  locality, 
and  duplicated  endlessly;  or  wherever  they  entice  customers 
through  other  than  true  or  complete  information,  by  adver- 
tising things  already  well  known,  or  by  stating  things  which 
they  do  not  know  to  be  true,  or  by  emphasizing  half-truths — all 
for  the  sake  of  private  profit,  if  public  loss — they  belong  to  the 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  165 

destructive  market-system.  To  that  degree  they  arrest,  deform, 
degrade,  or  destroy  life,  by  increasing  its  cost  and  difficulty. 

The  Ultimate  Consumer  the  Sole  Source  of  Economic 
Power. — Because  the  Ultimate  Consumer  pays  all  the  bills — for 
wages,  raw  material,  transportation,  profits,  selling-costs,  rent, 
interest,  profits,  dividends,  surplus,  etc. — he  has  full  right  to  a 
choice  instructed  by  the  best  grade  of  impartial  information  which 
modern  science  can  accord  him.  He  has  a  right  to  demand 
this  to  a  degree  of  freedom  and  accuracy  far  exceeding  his 
present  difficulty  in  discerning  what  is  best,  amidst  a  frantic 
mob  of  competing  owning-salesmen,  each  clamoring  into  his 
ear  a  lot  of  subsidized  and  misleading  half-truths  or  downright 
falsehoods,  or  when  forced  to  run  from  shop  to  shop,  as  now, 
before  he  can  find  that  which  one  visit  should  have  told  him. 

There  is  no  more  sense  or  reason  in  our  having  to  trot  our 
feet  off  in  trying  to  find  the  best  bargain  in  dry-goods  or 
machine-tools  than  there  would  be  in  postage-stamps,  which 
are  now  sold  (under  the  factory-system)  of  one  quality  and 
at  one  price  from  Eastport  to  Los  Angeles. 

This  right  to  an  intelligently  guided  selection  on  the  part 
of  the  Ultimate  Consumer  is  a  basic  one.  But  it  cannot  be 
attained  by  demands  addressed  to  the  helpless  tools  of  the 
present  commercial  system.  It  can  be  acquired  only  by  the 
abolition  of  the  present  un-system,  by  denying  to  all  non-con- 
sumers who  seek  to  buy  in  order  to  re-sell  (or  in  order  to 
extort  tribute  in  the  form  of  rent  or  interest)  the  privilege 
of  any  ownership-in-industry  whatever — as  is  done  in  every 
factory  in  the  land. 

Outline-definition  of  the  Market-system. — As  features  inci- 
dental to  this  undesirable  non-consuming  ownership,  the  defini- 
tion of  the  market-system  must  also  include  all  speculative 
investment  or  storage  for  profits  or  dividends,  all  agencies, 
all  drumming  and  advertising,  most  of  all  the  time  and  nervous 
energy  now  spent  in  combatively  determining  wages  or  salaries, 
all  time  lost  between  jobs,  and  all  financing  and  promoting. 
For  every  one  of  these  losses  consists  in  working  hard  (or 
worrying  needlessly)  to  do  something  which  either  the  Con- 
sumer, if  relying  upon  the  pure  factory-system  as  his  sole  sup- 
port, would  not  need  to  have  done;  or  which  does  not  actually 
aid  the  factory-system  in  supporting  his  life,  even  when  the 
Consumer  may  think  that  it  does;  or  which  would  get  itself 


166  MODERN   ECONOMIC  TENDENCIES 

done  better  without  any  effort,  if  only  the  seekers  after  private 
profit  at  public  loss  would  leave  the  situation  alone. 

Most  briefly,  commercialism  or  the  market-system  consists  in 
owning  what  one  doesn't  want,  because  someone  else  wants  it. 

Contributory  Commercialism. — The  market-system  also  in- 
cludes one  branch  of  effort  which  will  prove,  as  analysis  pro- 
ceeds, to  be  perhaps  the  most  important  of  all.  This  is  the 
widespread  diversion  of  what  would  otherwise  have  been  pro- 
ductive labor,  while  still  following  the  forms  of  what  would 
otherwise  have  been  a  factory-system,  into  aid  to  some  of  the 
combative  commercial  activities  listed  above. 

Thus  a  shop  of  printers  engaged  in  printing  instructive, 
entertaining  or  inspiring  books  is  a  part  of  the  national  fac- 
tory-system. But  that  same  lot  of  men  and  appliances,  when 
diverted — possibly  within  an  hour — to  the  printing  of  unneeded 
or  misleading  advertisements  which  soon  reach  the  waste-basket, 
becomes  thereby  a  part  of  the  market-system.  Similarly  a  lot 
of  stenographers  writing  negotiative  letters,  or  a  labor-union 
in  its  hours  of  conference  over  wages,  or  upon  strike,  with 
many  another  instance  of  what  is  apparently  a  part  of  the 
productive  system,  must  all  come  under  the  term  market-system 
in  its  destructive  sense. 

The  fact  that  the  workers  in  all  these  instances  may  draw 
their  pay  in  the  form  of  wages,  or  otherwise,  has  not  the  slight- 
est weight  in  determining  their  economic  character.  For  it 
is  not  that  which  goeth  into  a  workman,  but  that  which  cometh 
out,  which  determines  his  worth  to  society  or  to  himself. 

The  National  Market-system. — In  the  national  factory-system 
the  component  elements  were  found  to  be  either  individuals  or 
departments,  or  shops,  or  entire  factories.  Similarly  in  the 
national  market-system,  the  component  elements  may  be  either 
individuals  or  entire  organizations.  In  so  far  as  factories 
actually  interchange  materials  or  productive  services  they  to- 
gether constitute  themselves  a  larger  factory-system.  But  in 
so  far  as  their  selling-offices  spend  time  and  effort  in  negotia- 
tion preliminary  to  such  interchange,  enforced  only  by  their 
disgregated  ownership,  or  wherever  they  sell  to  outside  parties 
in  competition  with  each  other,  their  negotiative  forces  thereby 
constitute  a  larger  national  or  international  market-system. 

Commercialism  Always  Antagonistic. — One  consideration 
differentiating  the  market-system  from  the  factory- system  is  that 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  167 

the  business  of  the  former  is  always  economic  combat.  The 
exertion  is  all  directed  toward  counterbalancing  and  annulling 
an  equal  amount  of  exertion  put  forth  by  others.  Work  against 
such  obstacles  as  that  inevitably  arouses  in  him  who  strives  a 
sense  of  fault  in  the  opposing  human  being.  Failure  begets 
hatred  and  leaves  a  corroding  bitterness. 

Thus  two  farmers  may  haggle  a  week  over  the  price  of  a 
cow,  each  telling  all  his  neighbors  what  a  hard-fisted  old  skin- 
flint the  other  is.  Yet  if  neither  of  them  owns  the  cow — it 
and  the  two  farms  being  the  property  of  those  who  ultimately 
consume  the  potatoes,  milk,  and  beef  produced — then  the  cow 
would  be  transferred  from  one  farm  to  the  other  by  an  hour's 
labor,  the  price  being  settled  on  the  books  of  the  two  farms 
by  a  mere  clerk,  after  a  few  minutes'  conference  with  the  two 
farmers.  For  whether  the  price  were  too  low  or  too  high  would 
then  be  of  importance  neither  to  the  farmers,  to  the  clerk  nor 
to  the  Consumer-owners. 

Or  again,  imagine  a  man  who  wishes  a  dozen  errands  done, 
facing  a  dozen  boys  seeking  a  job.  This  man  typifies  the 
public  of  Ultimate  Consumers. 

Suppose,  in  the  first  place,  that  he  follows  the  plan  of 
selecting  one  boy  after  another,  assigning  to  each  an  errand. 
That  is  the  factory-system  in  embryo.  Human  limitations 
aside,  the  selections  will  be  made  peaceably  and  efficiently,  the 
man  picking  out  each  boy  for  the  task  assigned  as  wisely  as  his 
skill  will  permit. 

The  Commercial  System  in  Embryo.— But  suppose,  in  the 
second  place,  that  the  man  alters  his  plan  of  procedure  to  the 
market-system.  That  is  to  say,  he  now  scatters  upon  the 
ground  a  dozen  tickets,  each  ticket  a  commission  to  run  one 
errand.  He  then  tells  the  boys  to  scramble  for  the  tickets. 
This  introduces  the  feature  of  combat  over  ownership  of  the 
jobs,  as  a  prerequisite  to  productive  work,  where  neither  com- 
bat nor  ownership  is  needed  at  all.  What  will  be  the  result 
of  the  change  in  plan? 

In  the  second  case  will  occur  no  peaceable,  efficient  co-opera- 
tion of  the  twelve  boys  in  the  performance  of  a  dozen  errands, 
as  in  the  first  instance.  Instead  will  arise  war.  Now  the  boys  will 
fight  for  the  tickets,  not  because  the  boys  are  any  more  bellicose 
in  nature  than  they  were  the  moment  before,  nor  because  human 
nature  is  incurably  prone  to  fight,  but  merely  because  society 


168  MODERN   ECONOMIC   TENDENCIES 

has  insanely  arranged  matters,  in  the  second  case — or  insanely 
omitted  to  make  any  arrangement  whatever — so  that  a  fight  is 
an  unavoidable  preliminary  to  doing  any  productive  work! 

The  blame  for  all  war,  whether  commercial  or  martial,  rests 
not  upon  him  who  fights,  when  the  alternative  to  fighting  has 
become  more  destructive  to  human  life  than  the  fight,  but  upon 
every  obscure  him  who,  through  neglect,  stupidity,  indifference, 
cupidity  or  laziness,  has  allowed  a  planless  situation  to  arise 
wherein  life  cannot  continue  without  a  fight. 

The  Elements  of  Commercial  Economics  and  Ethics. — The 
second  situation  will  develop  several  obvious  faults  which  are 
so  typical  of  the  greater  social  faults  which  are  now  permeating 
our  entire  social  organization  that  they  are  well  worth  study. 
These  faults  in  embryo  are  these: 

(1)  The  tasks  will  no  longer  be  distributed,  even  approxi- 
mately, to  fit  the  individual  power  of  the  boys.    It  will  be  the 
best  fighters,  and  not  the  best  messengers,  who  get  the  jobs. 

(2)  The  tasks  will  no  longer  be  distributed  evenly.     Some 
boys  will  get  two  or  more  tickets  apiece;  others  will  get  none. 
Those  securing  more  than  one  ticket  will  delay  the  performance 
of  all  errands  except  one,  while  that  is  being  performed.    Mean- 
time other  boys  who  got  no  tickets  will  be  standing  idle. 

Congestion  and  delay  upon  the  one  hand;  simultaneous  lack 
of  employment  on  the  other !  Does  it  look  so  unlike  our  actual 
industrial  situation,  in  the  grasp  of  the  market-system? 

(3)  No  errand  can  be  performed  until  the  fighting  is  done. 
The  strength  left  for  speed,  and  the  nerve  for  nicety  of  judg- 
ment, are  what  is  left  after  the  exhaustion  of  combat.     There- 
fore there  will  always  result  a  deficit  of  both  production  and 
employment.    Nor  could  this  combat  long  remain  child's  play. 
Starvation  awaits  him  who  loses. 

(4)  The  worst  nature  of  the  boys,  instead  of  the  best,  will 
~be  brought  to  the  surface.     Antagonism  and  bitterness  wholly 
artificial  and  unnecessary  will  have  been  created.     Those  suc- 
ceeding will  become  snobbish.    Those  who  fail  will  become  re- 
vengeful. 

Ability  given  no  outlet  turns,  to  vindictiveness,  for  inhibition 
is  to  human  nature  what  lightning  is  to  milk.  Human  nature, 
under  this  mischievous  system,  will  seem  far  worse  than  it 
really  is. 

(5)  The  average  cost  of  each  errand  will  be  much  increased. 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  169 

In  consequence  the  Ultimate  Consumer  can  afford  to  distribute 
only  a  reduced  number  of  tickets,  as  compared  with  what  would 
have  been  possible  under  the  factory-system.  This  artificial 
deficit  in  the  normal  volume  of  demand  then  intensifies  the 
penalty  for  failure  in  the  fight,  and  hence  the  venom  of  combat, 
and  enlarges  the  proportion  of  those  who  must  surely  meet 
defeat  and  want. 

As  our  analysis  develops  this  simple  illustration  into  the 
dimensions  of  our  national  economic  system  it  will  become  plain 
that  this  last  factor — the  Consumer's  decreasing  purchasing- 
power — is  the  controlling  one  in  explaining  the  bulk  of  the 
growing  bitterness  pervading  what  we  call  the  social  problem, 
in  its  broadest  and  deepest  aspect. 

Human  Nature  and  the  Social  Problem. — This  illustration  of 
the  boys  demoralized  by  a  wrong  system  is  a  parallel  with  that 
of  the  modern  factory  when  permeated  with  ownership-in-in- 
dustry,  only  more  elementary.  In  each  case  there  is  no  ques- 
tion of  human  nature.  It  is  merely  one  of  wisdom  or  folly  in 
policy  of  organization,  in  the  face  of  a  human  nature  which  has 
remained  substantially  the  same  since  history  began. 

Ask  any  superintendent  of  any  actual  messenger-boy  service, 
or  any  other  employer  of  factory-labor,  if  he  thinks  that  the 
scramble-plan  is  better  than  the  orderly  one  of  assigning  work 
without  ownership  therein — and  therefore  without  fight  over 
that  ownership — and  he  will  declare  emphatically  in  favor  of 
the  non-owning  plan.  But  ask  that  same  man  if  he  prefers 
this  same  non-owning  plan  when  it  is  the  Ultimate  Consumer 
who  does  the  hiring,  through  the  retail-shop  as  agency,  and 
when  it  is  his  own  factory-organization  whose  work  is  hired 
thereby,  and  he  will  snort  his  indignant  repudiation  of  the 
idea.  In  that  case  he  prefers  that  the  orders  which  keep  his 
factory  going  shall  be  scrambled  for  in  the  dirt,  by  a  lot  of 
drummers  or  jobbers — with  the  inevitable  loss  of  many  orders 
otherwise  possible. 

For  some  reason  or  other  he  is  mortally  afraid  of  magnifying 
to  a  national  scale  the  very  policy  which  permeates  his  own 
entire  factory,  and  on  which  he  knows  that  its  efficiency  rests. 
This  prejudice  and  fear  prevail  almost  universally  among 
businessmen.  If  it  is  not  due  to  sheer  greed,  which  is  reckless 
of  the  country's  welfare,  it  can  be  understood  only  as  an  in- 
tellectual cowardice  which  is  none  the  less  shameful  because 


170  MODERN   ECONOMIC   TENDENCIES 

manifested  by  men  who  would  on  no  account  incur  the  stigma 
of  bodily  cowardice. 

It  is  this  moral  and  intellectual  timidity  on  the  part  of  our 
big  men  of  affairs  and  our  average  modest  citizen,  and  not 
some  stupidity  or  greed  on  the  part  of  "the  other  fellow/'  which 
is  the  weak  element  in  human  nature  which  is  involving  us  in 
all  our  present  troubles.  When  our  capitalist-employers  preach 
what  they  everywhere  practice  our  social  turmoil  will  cease, 
and  not  before. 

Social  Re-organization. — At  this  point  emphasis  must  be  laid 
as  heavily  as  space  will  permit  upon  the  error  of  one  superficial 
idea,  which  is  met  so  constantly  as  to  be  discouraging  beyond 
measure  to  anyone  seeking  a  world  more  wisely  organized  than 
this.  This  false  and  superficial  idea  is  that  "society  will  be 
reformed  when  human  nature  is  reformed/' 

But  in  these  illustrations  of  the  modern  factory  permeated 
with  ownership-in-industry,  or  of  the  dozen  messenger-boys 
similarly  poisoned,  there  is  no  question  of  human  nature  what- 
ever! In  each  case  the  actors  are  just  plain,  human  men  or 
women,  quite  like  the  reader. 

In  each  case  the  human  nature  is  the  same  under  either  system. 
Yet  the  results  of  the  two  systems  are  diametrically  opposite, 
along  both  economic  and  moral  lines.  No  conceivable  excellence 
of  human  nature  could  prevent  the  manifestation,  under  the 
wrong  system,  of  those  gross  evils  which  are  inseparable  there- 
from. 

These  illustrations  prove  broadly  one  of  the  most  basic  prin- 
ciples of  sociology,  namely,  that  social  phenomena  do  not  de- 
pend upon  human  nature  (except  as  to  such  basic  traits  as 
underlie  all  phenomena  alike),  but  wholly  upon  our  methods 
of  organizing  human  nature.  For  our  social  phenomena  re- 
peatedly turn  inside  out  over  night,  so  to  speak,  whereas  human 
nature,  if  it  changes  at  all,  changes  very,  very  slowly,  as 
centuries  pass. 

Thus,  in  our  present  problem,  it  is  not  the  proposed  ideal 
economic  system  of  the  future — in  this  book  nothing  more 
ideal  than  the  long  familiar,  well  proven  factory-system — which 
will  place  upon  human  nature  a  stress  beyond  its  powers  of 
endurance.  //  is  the  present  system  which  already  does  so. 
A  large  portion  of  all  present  immorality  will  prove,  upon 
examination,  to  be  due  merely  to  the  inability  of  perfectly  good 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  171 

human  nature  to  withstand  the  artificially  exaggerated  tempta- 
tions which  are  imposed,  quite  unnecessarily,  by  that  foolish 
lack  of  all  system  which  we  call  commercialism.1 

The  Basic  Economic  Contrast  Again. — The  inevitable  evolu- 
tion of  the  pristine  cottage-system,  under  the  stimulus  of  in- 
vention, has  therefore  given  to  modern  civilization,  in  its 
economic  aspect,  a  two-faced  form.  On  the  one  hand  has  arisen 
the  factory-system,  enormous  in  its  bulk,  comprising  some  nine- 
tenths  of  the  active  population;  yet  drawing  this  population 
usually  from  among  the  less  able,  brilliant  and  aggressive  people 
— although  it  also  includes  the  underpaid  intellectuals  of 
college,  laboratory  and  library.  It  creates  from  nature's  rawest 
stores  everything  with  which  we  support  life  and  make  it  com- 
fortable. It  brings  all  these  things  into  the  hands  of  those 
who  ultimately  consume  and  destroy  them,  in  the  development 
of  an  enlarged  volume  of  new  life  and  energy. 

On  the  other  hand  lies  the  market-system,  also  gigantic  in 
its  aggregate  energy,  but  contrasted  with  the  factory-system 
in  its  smaller  population,  in  its  brilliance  of  display,  in  its 
financial  scales  of  magnitude,  and  in  the  peculiar  sort  of  man- 
hood which  it  draws  into  its  ranks — not  to  be  too  quickly 
characterized  by  any  one  sweeping  adjective,  yet  everywhere  ex- 
hibiting a  certain  unity  of  character.  Whether  we  regard  the 
baron  of  finance,  the  traveling  drummer,  the  department-store 
merchant,  the  corner-grocer  or  the  itinerant  pedlar,  we  find 
in  each,  mingled  with  the  greatest  variety  of  other  attributes, 
two  necessary  instincts.  One  of  these  is  the  love  of  some  un- 
certainty in  life,  if  not  of  a  sheer  fight.  The  other  is  a  keen 
sense  of  property. 

The  typical  producer,  on  the  other  hand,  whether  high  or 
low  in  the  social  scale,  is  conspicuous  for  his  lack  of  both  of 
these.  Whether  he  be  an  artisan  at  his  bench,  or  a  skilled 
surgeon,  or  a  scientist,  or  an  educator,  he  is  everywhere  alike 
in  his  love  of  peace  and  of  work — not  necessarily  in  the  sense 
of  an  unusual  love  for  mere  exertion,  for  many  commercialists 
are  also  intensely  active,  but  of  work  in  the  sense  of  producing 
something  which  can  afterwards  be  viewed  as  an  accomplished 
thing — a  work  of  art,  a  thing  which  betters  the  condition  of  the 
human  race.  This  is  the  sense  of  craft. 

-  This  idea  cannot  be  understood  completely  until  the  chapter  upon 
Unemployment  has  been  read. 


172  MODERN   ECONOMIC   TENDENCIES 

With  these  creditable  features  of  the  factory-system  ap- 
parently must  be  associated  often  others  equally  characteristic, 
but  not  equally  delightful.  These  are  intense  monotony  of  task, 
longer  hours  than  prevail  in  the  market-system  (except  in  retail 
trade),  much  lower  average  incomes — approaching  always  the 
minimum  wage  upon  which  the  particular  grade  of  skill  in 
question  can  maintain  itself,  from  generation  to  generation — 
and  an  incessant  pressure  toward  the  reduction  of  the  courteous 
and  esthetic,  as  well  as  the  pecuniary,  sides  of  life  to  their 
minimum. 

But  these  repellant  features  of  factory-life  in  reality  have 
nothing  to  do  with  the  factory-system  itself.  They  are  imposed 
upon  it  only  ~by  the  parasitical  presence  of  the  market-system. 
It  is  the  latter  alone  which  sucks  out  the  life-blood  from,  and 
starves  into  discontent,  the  most  just  and  perfect  system  of 
organizing  labor  and  interchange  ever  yet  devised — the  factory- 
system. 

Labor  cannot  now  see  that  this  is  so.  Nor  can  the  rest  of 
the  world,  apparently,  see  that  until  it  sweepingly  condemns 
all  commercialism,  as  the  only  defect  adequate  in  magnitude 
to  explain  the  worldwide  discontent  with  factory-conditions,  it 
may  never  hope  to  prove  to  labor  that  the  factory-system  is 
indeed  good. 

While  unquestionably  there  has  been  an  advance  in  the  ad- 
ministration of  our  better  factories  during  recent  decades,  in 
the  direction  of  providing  better  light  and  air,  and  adding  some 
slight  suggestions  of  beauty,  comfort,  courtesy  and  recreation — 
known  in  the  vernacular  as  "welfare-work" — yet  these  ad- 
vances are  by  no  means  universal.  It  has  long  been  obvious 
that  they  are  not  competent  to  meet  the  growing  discontent. 
To  the  masses  of  people  working  in  the  smaller  or  less  success- 
ful factories,  or  in  sweat-shops,  or  to  the  unskilled  laborers 
who  necessarily  drift  constantly  from  factory  to  factory,  or 
from  one  construction-camp  to  another,  or  to  that  vast  popula- 
tion of  petty  tradespeople  immured  in  petty  shops — all  of  these 
buying  their  supplies  through  a  market-system  which  every- 
where, as  a  matter  of  course,  "charges  all  the  traffic  will  bear" 
— these  benefits  may  never  come. 

Through  the  leech-like  activities  of  commercialism,  life  is 
inevitably  being  reduced  automatically  to  the  lowest  level  at 
which  it  can  continue,  without  being  snuffed  out  altogether — 


THE   MARKET-SYSTEM,    OR   COMMERCIALISM  173 

and  this  is  a  very  ugly  level  of  life  indeed.  It  is  this  which 
constitutes  society's  real  problem. 

For  the  believer  in  the  gradual  reform  of  factory-conditions 
must  never  forget  that  it  is  not  the  factory-life  of  the  factory- 
worker  which  needs  amelioration,  so  much  as  it  is  his  home- 
life.  Yet  this  latter  the  welfare-worker  cannot  touch,  with 
his  hard,  paternal  wand.  It  must  be  left  autonomous  or  else 
ruined. 

Moreover,  the  problem  is  far  wider  than  either  factory  or 
home.  It  is  the  conditions  which  surround  and  feed  (or  starve) 
the  worker's  home,  and  not  something  within  it,  which  must 
be  reformed.  Most  of  all,  it  is  prices  of  commodities  and 
regularity  of  employment  which  need  reform. 

Even  what  little  has  been  accomplished  in  the  way  of  welfare- 
work  has  been  enforced,  rather  than  spontaneous,  by  the  far 
more  rapid  advance  in  the  standards  of  the  market-system  in 
luxury.  The  dazzling  development  of  the  natural  habitat  of 
the  commercialist :  the  city-offices  and  lunch-clubs,  the  up-town 
apartments  and  hotels,  the  brilliant  shops,  theaters,  social  clubs, 
automobiles,  etc.,  has  presented  a  contrast  with  the  habitat  of 
the  productive  system — the  factory,  warehouse  and  slum — too 
painful  to  permit  the  latter  to  remain  altogether  stationary. 
Yet  one  can  say  truly  that,  while  we  have  been  developing  our 
offices,  shops,  hotels,  and  theaters  with  every  device  known  to 
technical  science,  we  have  left  the  homes  of  the  workers,  at 
their  worst,  unchanged. 

But  this  method  of  progress  defeats  its  own  end.  If  we  are 
ever  to  find  social  happiness,  peace  and  stability,  it  will  never 
be  on  a  plan  wherein  the  rich  advance  by  leaps  and  bounds, 
dragging  after  them  the  poor  at  a  distance  which  is  restrained 
from  complete  abandonment  only  by  fear  of  outraging  humanity 
to  the  point  of  explosive  revolt. 

Discontent  and  social  instability  arise  only  from  disparity 
and  injustice.  It  is  absurd  and  childish  to  point  out  that  the 
average  skilled  workman  enjoys  to-day  far  more  than  he  had 
fifty  or  an  hundred  years  ago.  The  source  of  his,  most  natural 
discontent  is  that  relatively,  rather  than  absolutely,  he  has  fallen 
behind. 

He  has  not  progressed  at  anything  like  the  rate  that  the 
negotiators  have  enjoyed.  When  the  latter  are  now  enjoying 
a  brilliance  and  luxury  of  life  some  three,  ten  or  a  hundred 


174  MODERN  ECONOMIC  TENDENCIES 

times  that  available  a  century  ago — whichever  it  may  be — what 
basis  is  it  for  content,  or  what  sign  of  justice,  that  the  artisan 
enjoys  only  some  three,  ten  or  an  hundred  per  cent  of  advance  ? 

For  in  the  habitat  of  the  negotiators  appears  increasingly 
every  extreme  of  contrast  with  the  characteristics  of  the  factory. 
Order,  system  and  discipline,  except  as  they  apply  to  underlings, 
are  conspicuously  absent.  While  often  there  prevails  the  intense 
energy  and  assiduity  of  the  fighter,  yet  even  there  studiousness 
and  asceticism  are  unknown.  Instead  appears  the  extreme  of 
convenience,  luxury,  artistic  beauty,  mental  superficiality,  bril- 
liant display,  subservience  to  every  whim,  sometimes  even  vulgar 
ostentation,  and  a  continual  demand  for  distraction  from 
monotony  or  fatigue  which  borders  as  nearly  as  it  dares  upon 
the  lazy  and  immoral. 

Here  and  there,  it  is  unquestionable,  one  uncovers  among 
the  commercialists  a  minority  of  exceptions  to  these  statements 
— sporadic  instances  of  real,  wholesome,  devoted,  self-restrained 
virility  and  devotion  to  the  world.  But  it  is  always  in  minority. 
It  is  not  characteristic  of  the  normal  inducements  of  the  system. 
Just  as  in  those  rare  cases  where  one  find  beauty  or  idealism 
blossoming  amidst  the  factory-system,  these  are  instances  of 
life  persisting  in  spite  of  its  environment,  rather  than  of  one 
in  harmony  with  its  surroundings. 

For  the  very  soul  of  the  market-system  is  ownership,  and 
ownership  means  license.  The  man  who  does  not  place  self- 
gratification  first  has  handicapped  himself  against  success  in 
the  market-system.  Indeed,  the  man  who  does  not  own  or 
control  something,  responsible  only  to  his  own  ideas  as  to 
opportunity,  private  profit  or  public  need,  has  no  place  in  the 
market-world. 

The  Commercial  Tourney. — The  prime  function  of  ownership- 
in-industry  is  to  the  modern  businessman  what  horse  and  armor 
were  to  the  medieval  knight — a  means,  pretext  and  license  for 
free  wandering,  to  be  spiced  with  antagonism  and  mortal 
combat  wherever  might  appear  a  chance  of  profit  therein. 
Society,  in  discarding  its  "tin  clothes,"  lost  merely  the  insignia, 
and  not  the  institution,  of  knight-errantry. 

The  man  who  does  not  instinctively  love  a  free  fight  has 
no  place  in  commercialism.  The  basic  idea  of  the  market  is 
a  fight — commercial  nerve  being  the  sort  of  courage,  and  finan- 


THE   MARKET-SYSTEM,   OR   COMMERCIALISM  175 

cial  and  office  paraphernalia  the  sort  of  weapons,  in  use.  The 
whole  spirit  of  the  market  is  win  or  lose,  as  one  best  may. 

All  of  the  property  visible  there  has  been  entered  solely  as 
counters  recording  victory  or  defeat,  to  suffer  confiscation  by 
combat  according  to  set  rules.  To  the  larger  operators  money 
has  long  since  lost  its  normal  significance,  either  as  dependent 
upon  time-effort  or  as  bearing  upon  personal  comfort;  but  to 
the  host  of  smaller  commercialists  loss  is  a  tragedy. 

Yet  the  man  who  enters  the  market,  and  loses,  receives  every- 
where the  same  grade  of  help  and  sympathy  accorded  to  a 
twelfth-century  knight  who  came  out  of  a  joust  with  a  broken 
head.  In  neither  case  is  humanity  lacking,  expressed  in  a  crude 
way.  But  neither  then  nor  now  has  suspicion  been  aroused 
that  personal  outrage  has  been  done,  society  demoralized  by  an 
exhibition  of  brute  force  where  reason  .should  have  prevailed 
instead,  and  all  people  impoverished,  by  an  utter  waste  of  the 
best  nerve  in  the  land. 

Nor  has  civilization  yet  advanced  to  where  there  is  more  than 
a  glimmer  of  perception  that  law  and  public  opinion  should 
enter  to  stop  the  whole  thing.  Any  such  an  idea  is  quite  un- 
intelligible to  the  average  commercialist,  albeit  he  has  always 
before  his  eyes  the  success  of  the  factory-system,  in  which  no 
combat  is  ever  permitted.  It  is  as  incomprehensible  to  him 
as  would  have  been  to  Eichard  the  Lion-hearted  a  land  so  gov- 
erned that  no  bloody  jousts  were  ever  allowed. 

We  are  as  thoroughly  steeped  in  our  loyalty  to  our  rough- 
and-tumble  market-system  as  we  are  to  our  orderly  factory- 
system,  never  dreaming  that  the  two  ideals  and  policies 
constitute  hopelessly  opposite,  contrasted  and  incompatible 
extremes.  Yet  in  both  these  systems  the  main  duty  to  be 
accomplished  is  merely  interchange.  The  main  reason  for 
collecting  armies  of  workmen  and  dozens  of  departments  into 
a  factory,  under  a  common  superintendence  and  Central  Office, 
is  for  the  constant  interchange  between  the  workmen  of  partly 
finished  tasks.  //  it  were  not  for  this  the  largest  factory-per- 
sonnel in  the  land  would  be  that  group  which  perforce  must 
work  together  on  the  one  largest  appliance. 

Likewise  in  the  market-system,  the  prime  reason  for  collecting 
tens  of  thousands  of  negotiators  into  a  congested  nest  of  sky- 
scrapers, or  for  the  segregation  of  shops  into  groups  in  cities 
or  villages,  is  apparently  to  facilitate  this  same  basic  need 


176  MODERN   ECONOMIC   TENDENCIES 

of  life:  interchange.  Although  the  negotiators  in  reality  are 
not  accomplishing  interchange,  but  are  braking  it  instead,  yet 
they  think  that  they  are.  They  find  intercourse  personally 
profitable,  however  detrimental  to  the  Consumer.  So  they  gravi- 
tate into  closer  and  closer  congestion,  dragging  after  them  all 
their  henchmen  and  trades-people,  to  the  formation  of  cities 
the  concentration  of  which  is  becoming  the  despair  of  modern 
social  intelligence. 

Emulation  and  Competition. — In  each  of  these  fields  of  in- 
terchange— the  factory  or  the  market — there  is  always  at  work, 
of  course,  that  motive  spirit  which  leads  each  human  being 
to  desire  to  outstrip  his  fellows.  This  spirit  is,  or  may  be, 
just  as  active  within  a  factory  owned  by  complete  monopoly, 
where  everyone  is  paid  wages  or  salary,  as  between  owner  and 
owner.  But  in  the  a  two  -cases  the  effects  upon  society  are 
exactly  opposite.  Hence  are  needed  distinctive  names  for  the 
same  motive  in  the  two  situations. 

The  spirit  of  rivalry  at  work  within  the  factory,  leading  each 
worker  to  strive  to  produce  more,  will  here  be  called  emulation. 
In  this  sense,  when  justly  rewarded,  emulation  is  one  of  the 
greatest  productive  forces  at  the  command  of  man. 

But  when  this  same  tendency  is  manifested  in  the  combative 
market-system,  in  struggle  over  ownership  or  price,  prompting 
each  to  fight  harder  and  to  destroy  more  of  some  other  per- 
son's effort,  it  will  be  known  here  as  commercial  competition. 
In  this  sense  competition  may  become,  and  now  probably  is, 
the  greatest  destructive  force  known  to  man,  not  even  excepting 
war.  For  the  average  daily  cost  of  the  Great  War,  to  either 
Or  eat  Britain  or  America,  is  not  over  one-third  of  America's 
daily  cost  of  commercial  competition,  measured  merely  in  dollars. 
In  both  cases  the  loss  in  life  is  worse  than  that  in  money. 

It  is  emulation,  and  not  competition,  which  is  the  life  of 
trade.  Competition  throttles  it  so  fatally  that  competition 
always  has  to  be  replaced,  ultimately,  by  consolidation.  (As 
to  this  topic,  treated  in  further  detail,  see  the  later  chapter 
upon  "Economic  Equilibrium.") 

The  greater  the  rewards  for  emulation  in  production  become, 
the  more  intense  will  be  that  creative  spirit.  But  the  greater 
the  prizes  won  by  commercial  combat  or  competition  become, 
the  less  is  left  to  form  an  incentive  for  emulation  in  production. 
As  commercialism  grows  in  brilliance  of  prosperity,  activity 


^  THE   MARKET-SYSTEM,    OR   COMMERCIALISM  177 

and  luxury,  the  factory,  as  the  seat  of  that  emulative  produc- 
tion which  alone  supplies  all  things  consumed,  and  now  in- 
creasingly taxed  to  support  commercial  militarism,  must  gradu- 
ally lose  its  natural  reward,  and  hence  its  emulative  zest, 
and  must  degenerate  increasingly  into  a  sodden  atmosphere 
of  sullen  resignation  to  poverty,  monotony  and  hopelessness, 
pierced  here  and  there  with  flashes  of  intense  bitterness,  as 
black  thunder-clouds  are  rent  by  lightning. 

It  has  been  assumed  all  but  universally,  in  past  economic 
debate,  that  it  is  the  factory-system  which  alone  deserves  our 
interest,  because  it  alone  feeds  us  and  because  labor's  reward 
is  thought  to  be  determined  there.  This  assumption  has  no- 
where been  so  effectively  emphasized  as  by  the  worldwide 
propaganda  of  the  socialist  movement. 

But  it  is  the  office  of  this  book  to  divert  attention  in  the 
opposite  direction,  toward  the  market-system,  because  it  is  this 
which  is  starving  us.  It  is  because  of  the  market-system's  vital 
power  over  every  phase  of  our  coming  destiny,  both  as  to  our 
physical  famine  and  our  political  stability,  that  it  deserves  the 
closest  attention  and  most  accurate  analysis  of  which  the  human 
mind  is  capable. 


CHAPTER  VIII 

THE   EFFICIENCY   OF   SOCIAL   ORGANIZATION 

THE  contrast  between  the  two  sorts  of  policy  in  industry 
which  has  formed  the  groundwork  for  all  which  has  preceded 
forms  the  basic  factor  for  measuring  the  efficiency  or  ineffi- 
ciency with  which  a  given  society  has  organized  itself  for  its 
own  support.  The  technical  meaning  of  the  word  efficiency, 
it  should  be  remembered,  is  the  proportion  of  what-comes-out 
to  what-has-been-put-in. 

Now  it  is  a  basic  law  of  biological  equilibrium  that  what 
each  individual,  whether  brute  or  human,  expects  to  get  out 
of  life  is  automatically  balanced  with  its  inherent  ability  to 
produce  its  own  life-support.  While  individuals  may  depart 
slightly  from  this  law  in  either  direction,  toward  sloth  on  the 
one  hand  or  over-ambition  on  the  other,  yet  the  general  tendency 
is  overwhelmingly  toward  the  balance  stated. 

Thus  a  clam,  under  normal  environment,  naturally  expects 
to  accomplish  and  receive  what  a  clam  naturally  desires.  With 
the  horse,  which  is  far  more  intelligent  and  sensitive  than  the 
clam,  the  same  law  holds  true.  With  an  imbecile  human  being 
the  same  holds  true.  For  every  grade  of  life,  nervous  system 
and  ability,  whether  brute  or  human,  educated  or  uneducated, 
this  law  holds  true,  provided  the  opportunity  be  normal. 

But  with  man,  in  modern  complex  society,  the  opportunity 
to  produce,  support  life  and  be  happy,  and  the  temptation  to 
be  well  disposed  towards  one's  neighbors,  depends  largely,  as 
we  saw  with  the  messenger-boys — and  to-day  we  might  say 
overwhelmingly — upon  the  relative  perfection  or  efficiency  of 
form  of  organization  of  whatever  grades  of  individual  ability 
happen  to  be  available.  Therefore  the  sole  proper  concern  of 
the  sociologist  is  the  purity  of  the  relationships  formally  in- 
stituted, whether  by  statute  or  by  economic  tradition  and  factf 
between  man  and  man.  It  is  his  business  to  relate  man  to  man 
in  such  a  manner  that  conflict  will  be  avoided. 

178 


THE    EFFICIENCY    OF   SOCIAL   ORGANIZATION  179 

Relationships  versus  Components. — But  this  task  of  relating 
men  properly  does  not  depend  in  any  way  upon  the  quality  or  in- 
ternal characteristics  of  the  things  related.  Indeed,  inefficient  men 
need  to  be  related  properly  to  each  other,  in  order  to  avoid  impact 
and  friction,  just  as  much,  or  even  more,  than  efficient  men  do. 

That  is  to  say,  questions  as  to  individual  human  efficiency 
may  belong  to  the  biologist,  the  physician,  the  surgeon,  the 
psychologist,  the  educator  or  the  religionist.  They  certainly 
do  not  belong  to  the  sociologist.  The  skill  of  the  latter  is 
shown  where  his  responsibility  lies,  namely,  in  the  right  or 
wrong  form  of  organization  of  whatever  personalities  the  skill 
of  the  biologist,  the  physician,  the  psychologist,  the  educator 
or  the  preacher  may  have  made  available  for  his  organization. 

To-day,  wherever  we  investigate,  we  find  this  principle  cor- 
roborated. We  find  the  inefficiency  of  result,  and  therefore  the 
hope  for  improvement  in  the  future,  to  lie  far  more  in  our 
faults  of  organization  of  society  than  in  the  faults  lying  within 
the  human  individual.  But  what  we  fail  to  grasp  to-day  is 
the  fact  that  the  study  of  organizational  faults,  on  the  one  hand, 
and  of  individual  faults,  on  the  other,  constitute  entirely  dis- 
tinct and  contrasted  professions. 

Thus  in  the  study  of  the  efficiency  of  a  locomotive,  for  in- 
stance, we  have  two  or  more  distinct  professions  involved  in 
producing  the  result.  These  are  (1)  the  metallurgist,  who  sup- 
plies the  component  steel,  brass,  etc.,  of  which  it  is  composed; 
and  (2)  the  mechanical  engineer,  or  designer,  who  says  how 
these  components  shall  be  put  together,  as  to  proportions  and 
relationships,  in  order  to  produce  the  best  locomotive.  But  no 
engineer  is  ever  so  silly  as  to  think  that  when  we  have  pro- 
vided ourselves  with  a  stock  of  good  steel,  brass,  etc.,  we  shall 
necessarily  have  a  good  locomotive,  any  more  than  piles  of 
excellent  stone,  brick,  timber,  etc.,  insure  the  possession  of  a 
splendid,  or  even  safe  or  satisfactory,  building. 

The  engineering  profession,  and  the  men-of-affairs  whom 
they  serve,  have  never  been  disposed  to  blur  the  clear  distinc- 
tion between  these  two  callings — which  we  might  call,  for  con- 
venience, the  component  and  the  constructive  vocations  re- 
spectively. They  have  always  been  able  to  discern  the  wide 
gap  existing  between  questions  of  inherent  quality  of  parts,  on 
the  one  hand,  and  of  relationships  between  parts,  upon  the 


180  MODERN   ECONOMIC   TENDENCIES 

other.     The  two  fields  have  always  been  considered  distinct 
professions  and  given  quite  different  educational  approach. 

If  a  locomotive  makes  a  poor  record  because  of  poor  steel, 
weak  brass  or  defective  boiler-covering,  it  is  never  the  designer 
who  is  blamed.  The  latter  is  at  fault  only  if  good  steel,  good 
brass,  etc.,  have  been  so  wrongly  put  together  that  impact  and 
friction,  or  radiation,  or  incomplete  combustion,  etc.,  ensue  in 
undue  amount. 

Social  Architecture. — But,  in  our  groping  attempts  at  a 
social  science,  virtually  all  of  the  highest  authorities  confuse 
these  basic  issues.  They  do  not  know  whether  they  are  social 
designers  or  bio-psychological  metallurgists.  They  are  con- 
stantly trying  to  produce  a  better  society  by  direct  attack  upon 
the  individual.  By  some  lucky  hit-or-miss  of  cultivation  they 
hope  to  evolve  a  superman,  when  all  that  is  needed  is  a  natural 
social  organization  in  which  normal  men  may  develop  normally. 

They  are  still  hopelessly  steeped  in  the  primer-grade  idea 
that  what  constitutes  an  excellent  society  is  an  aggregation  of 
excellent  individuals — just  as  if  baking  a  good  cake  consisted 
merely  in  securing  good  flour,  eggs,  etc. — and  that  society  can 
be  made  good  and  efficient  only  as  one  first  makes  its  component 
individuals  good  and  efficient.  Are  we  never  to  have  a  real 
profession  of  social  architects,  but  only  skillful  social  brick- 
makers  and  stone-cutters,  who  blunder  horribly  when  it  comes 
to  designing  the  structure  of  society? 

Yet  the  whole  basis  for  modern  thought  which  has  been  pro- 
vided by  evolutionary  science  must  brand  any  such  an  idea 
as  this  as  obsolete  and  incompetent,  and  must  start  us  at  the 
other  end  of  the  line — to  make  human  relationships  just  and 
efficient  first — and  then  to  rely  upon  their  wholesome  reaction 
upon  the  individual  to  develop  whatever  superman  may  be 
found  to  be  natural.  The  evolutionary  law  which  places  en- 
vironment as  the  determinant  of  the  individual  applies  to  man 
as  cogently  as  to  any  other  form  of  life. 

With  man,  his  most  active  environment  is  not  topographical, 
but  social.  His  social  environment  consists  not  so  much  of 
certain  sorts  of  individuals  as  it  does  in  the  sort  of  acts  toward 
him  which  are  enforced  upon  the  ordinary,  garden-variety  of 
human  beings  with  whom  he  happens  to  be  contiguous,  by  the 
social  relationships  embodied  in  constitution,  statute  or  tradi- 
tion. 


THE   EFFICIENCY   OF   SOCIAL   ORGANIZATION  181 

We  cannot  alter  human  nature  appreciably,  but  these  rela- 
tionships we  can,  and  do,  tear  down  and  build  up  most  rapidly. 
Every  organizer  or  superintendent  of  labor  knows  these  abstract 
facts  intuitively.  Every  foreman  knows  well  that  the  efficiency 
of  a  lot  of  workmen  can  be  ruined  by  wrong  handling,  in  the 
sense  of  disorganization,  without  their  natures  having  under- 
gone any  basic  change  whatever;  and  that  good  organization 
can  double  the  output  of  some  other  bunch,  without  necessarily 
having  converted  any  of  its  individuals  into  near-angels. 

It  is  incomprehensible  how  the  orthodox  professors  of  political 
economy,  whose  first  responsibility  is  the  efficiency  of  the 
nation's  industrial  system — or  our  clear  thought  about  it,  at 
least — can  fail  so  utterly  to  base  their  science  upon  this  familiar 
fact.  It  is  puzzling  to  explain,  on  the  other  hand,  why  the 
businessmen,  who  base  their  every  day's  work  upon  this  fact, 
seem  to  be  unable  to  apply  the  idea  to  the  nation  as  a  whole. 

For,  as  society  grows  in  population,  and  in  those  means  for 
communication  which  weld  into  unity  vast  populations  pre- 
viously discrete,  this  matter  of  mutual  relationships  grows 
tremendously  in  importance,  while  that  of  personalities  wanes. 
Man  finds  himself  to-day,  in  spite  of  widespread  industry, 
patriotism,  skill,  Christian  character  and  marvelous  technical 
attainments,  surprisingly  unhappy.  Yet  he  instinctively  de- 
clines to  believe  that  it  is  all  his  own  fault.  Many  people  find 
comfort  in  believing  that  it  is  all  somebody  else's  fault;  but 
most  of  us  welcome  a  more  Christian  explanation  than  that. 

Bitter  Social  Philosophies. — For  herein  lies  the  social  poison 
which  the  seekers  after  a  superman  are  distilling  into  society's 
veins.  If  all  things  must  have  their  origin  in  the  individual, 
then  the  only  explanation  of  all  our  obvious  ills  is  the  personal 
fault  of  "some  other  fellow/'  It  is  this  philosophy  which  plays 
a  large  part  in  the  recurrence  of  wars  and  revolutions.  If  it 
does  not  cause  them,  it  sadly  embitters  them. 

It  never  seems  to  occur  to  anyone,  and  last  of  all  to  our 
professional  sociologists,  to  explain  all  these  irritating  ills  in 
terms  of  the  real  cause,  namely,  a  wrong  relationship  between 
each  man  and  his  neighbor,  while  both  man  and  neighbor  re- 
main perfectly  good  men.  For  this  relationship  is  a  thing 
which  can  be  remedied,  whereas  the  reform  of  the  individual 
remains,  after  four  thousand  years  of  endeavor  at  its  solution, 
the  one  problem  at  which  we  have  made  no  visible  progress.  We 


182  MODERN   ECONOMIC   TENDENCIES 

shall  have  made  a  long  stride  toward  permanent  peace  when 
we  have  realized  that  every  quarrel  between  man  and  man  is 
but  the  outward  manifestation  of  a  mere  wrong  relationship 
which  both  of  them,  with  equal  guilt  and  equal  innocence,  have 
allowed,  by  mere  negligence,  to  creep  upon  them  both  unawares. 

Relationships  versus  Personalities. — For  relationships  we  can 
alter,  but  individuals  we  cannot.  At  least,  the  latest  evidence 
of  what  nineteen  centuries  of  this  line  of  effort  have  accom- 
plished is  certainly  discouraging.  Indeed,  human  attempts  at 
the  reform  of  one's  neighbors  have  seldom  netted  any  gain  in 
happiness.  They  have  usually  produced  negative  results,  de- 
veloping snobbery  rather  than  Christian  spirit  in  the  actor,  and 
begetting  hatred  rather  than  love  in  the  object. 

Even  attempted  reform  at  one's  self  is  usually  futile,  result- 
ing in  self-conscious  priggishness  rather  than  exalted  life.  With 
our  advance  into  the  twentieth  century  we  are  supposed  to  have 
left  that  childish  philosophy  behind  us. 

But  reform  of  human  relationships,  whether  with  one's  im- 
mediate neighbors  or  for  society  as  a  whole,  is  a  field  for  al- 
truistic effort  which  never  raises  nettles  with  the  wheat.  Ee- 
form  of  our  conscious  relationships  with  those  with  whom  we 
contact  is  the  business  of  personal  religion  and  ethics.  Reform 
of  our  formally  instituted  relationships  with  the  multimillions 
whom  we  never  meet  nor  know  personally,  yet  with  whom  we 
interact  in  the  most  powerful  influences  now  affecting  modern 
life,  is  the  duty  of  the  professional  sociologist. 

For  to-day,  in  the  manifold  trials  of  life,  we  are  affected, 
as  to  personalities,  only  by  those  with  whom  we  happen  to  come 
into  actual  contact;  and  these  are  relatively  very  few.  But 
simultaneously  we  have  become  puppets  actuated  by  huge  forces 
developed  and  set  free  by  hordes  of  distant,  unknown  human 
beings,  each  of  them  as  well-meaning  as  ourselves,  and  as  un- 
conscious of  their  influence  over  us  as  we  are  of  our  influence 
over  them. 

Each  of  these  innumerable  unknown  companions  on  the  road 
through  life  acts  only  naturally,  under  the  particular  circum- 
stances of  his  individual  life.  He  reacts  to  his  environment 
of  birth,  breeding  and  surroundings  exactly  as  we  do  to  ours — 
naturally  and  inevitably.  Yet  the  result  is  toil  and  trouble 
for  us  both;  but  only  because  we  have  all  been  wrongly  related, 
in  a  society  which  has  been  allowed  to  acquire  population  and 


THE   EFFICIENCY  OF  SOCIAL  ORGANIZATION  183 

intricate  appliances  far  more  rapidly  than  it  has  perfected  an 
organization  adequate  thereto. 

Social  versus  Individual  Evolution. — It  is  therefore  the  first 
duty  of  the  student  of  economic  conditions  to  trace  accurately 
in  history  the  evolution  of  industrial  relationships,  in  their 
broadest  sense,  quite  aside  from,  or  even  in  direct  contrast  to, 
any  growth  in  individual  efficiency,  whether  through  education 
or  eugenics.  Indeed,  to  anticipate  the  ultimate  fruits  of  this 
investigation,  it  will  actually  be  found  that  it  is  our  very  growth 
in  individual  efficiency  and  education,  as  evidenced  in  the  rapid 
progress  of  material  invention,  which  is  involving  us  ever  more 
inextricably  in  this  toil  and  trouble,  rather  than  serving  for  our 
relief  therefrom.  It  does  this  by  its  multiplication  of  the 
mechanical  intricacies  of  our  social  life,  yet  with  no  parallel, 
adequate  development  of  our  formal  organization  of  society  to 
correspond. 

War  and  Peace. — Indeed,  this  has  always  been  the  function  of 
eras  of  peace — to  develop,  through  the  arts,  an  actual  form  of 
society  which  becomes  more  and  more  incompatible  with  the 
fixed  form  of  government.  Thus  arises  gradually  a  tide  of 
social  impact,  friction  and  discontent.  Then  has  always  come, 
finally,  a  sudden  regaining  of  equilibrium,  in  earthquake- 
fashion,  through  some  war  or  revolution  which  accomplished 
instantly,  so  to  speak,  that  reform  of  the  formal  relationships 
of  society  which  should  have  been  performed  gradually  by  debate 
throughout  the  preceding  decades. 

Virtually  every  advance  in  the  institutional  form  of  society 
has  been  accomplished  by  war'  or  revolution.  Virtually  none 
such  of  a  major  sort  has  been  accomplished  by  the  rational  de- 
bate of  times  of  peace.  War  and  revolution,  however  revolting 
their  cost,  have  been  virtually  our  only  educators  in  civil  gov- 
ernment and  social  organization. 

Such  has  been  the  universal  history  of  our  cruder  past. 
Whether  such  shall  continue  to  be  the  history  of  our  near  future, 
which  the  reader  is  now  engaged  in  making,  is  for  him  to 
decide.  But,  if  he  hopes  to  act  effectively  upon  this  suggestion, 
to  forefend  violence,  he  must  do  so  with  the  energy  and  decision 
which  is  exercised  in  time  of  war.  This  social  problem  is  no 
pink  tea.  If  we  wish  to  avoid  violence  we  must  accomplish 
peacefully  what  violence  accomplishes. 

In  pursuing  our  present  investigation,  therefore,  our  first 


184  MODERN   ECONOMIC   TENDENCIES 

task  is  to  eliminate  all  desire  for  data  concerning  the  individual, 
when  regarded  as  a  cause.  The  acts  of  the  individual  are  the 
result,  and  not  the  cause,  of  social  phenomena. 

These  social  phenomena  consist,  instead,  of  a  series  of  con- 
stantly changing  institutional  human  relationships — a  series 
which  unfolds  itself  according  to  natural  laws  which  we  are 
now  engaged  in  identifying,  quite  independently  of  any  slow 
development  of  the  individual.  This  unfolding  of  history 
brings  unheralded  events  crashing  down  upon  us,  as  during  the 
last  few  years,  with  a  suddenness  and  unexpectedness  which 
is  baldly  contrasted  with  the  slow,  well  planned  and  diligently 
cultivated  growth  of  human  nature. 

The  Basic  Economic  Contrast  Again.— In  following  this  idea 
into  economic  fields,  as  our  guide  in  our  search  for  the  welfare 
of  the  Ultimate  Consumer,  it  is  this  contrast  between  that  well 
tried  human  relationship  called  the  factory-system,  on  the  one 
hand,  and  that  institution  which  is  called  here  the  market- 
system,  or  commercialism,  on  the  other,  which  forms  the  prime 
indicator  of  social  efficiency.  This  measure  of  social,  or  in- 
stitutional, as  contrasted  with  personal,  efficiency  finds  expres- 
sion in  the  proportion  prevailing  between  "value"  and  "valua- 
tion," preliminary  definition  of  which  terms  were  given  on  page 
44.  These  definitions  may  now  be  amplified  one  step  further 
toward  their  exact  determination  in  terms  of  dollars. 

Value  and  Natural  Cost.— It  will  be  held  here  that  the  sole 
cost  for  a  commodity  to  which  the  Consumer  can  naturally  and 
justly  be  held  is  that  involved  in  maintaining  the  factory-system 
requisite  for  producing  that  article  and  bringing  it  to  him. 
This  cost  will  be  considered  hereinafter  to  be  the  natural  cost; 
and  cost  in  this  natural  sense  becomes  synonymous  with  value 
and  natural  price. 

All  costs  in  addition  to  this  which  may  be  incurred  through 
the  artificial  antagonisms  incidental  to  ownership-in-industry, 
where  ownership  is  quite  unnecessary,  and  which  form  a  major 
factor  in  all  present  market-prices,  will  be  held  to  be  unnatural, 
unnecessary,  oppressive  and  unjust.  They  should  be  made  im- 
possible also — a  thing  to  be  accomplished  automatically  as  soon 
as  ownership-in-industry  is  made  illegal. 

In  the  published  analyses  of  economic  problems,  whether  in 
the  form  of  treatises  upon  political  economy  or  essays  upon 
public  versus  private  ownership,  there  appear  the  greatest 


THE   EFFICIENCY   OF   SOCIAL   ORGANIZATION  185 

variety  of  definitions  of  value,  and  of  methods  of  accounting. 
But  for  the  purpose  of  a  scientific  analysis  of  the  general 
economic  situation  there  can  be  but  one  method  of  accounting, 
and  that  one  based  upon  this  fundamental  contrast  between  the 
factory-  and  the  market-systems.  There  can  be  but  one  definition 
of  value,  and  that  is  the  amount  of  energy  going  into  or  coming 
out  of  a  thing  at  the  point  of  Ultimate  Consumption,  with 
supply  regarded  as  performed  solely  by  the  factory- system. 

For  the  time  and  place  of  Ultimate  Consumption  is  the  sole 
point  in  the  economic  system  at  which  it  is  possible  to  equate 
money  accurately  with  human  energy.  This  is  the  only  point 
at  which  money  represents  wholly  the  transformation  of  human 
energies  into  commodities,  or  of  commodities  into  human 
energy,  with  none  of  it  dissipated  into  economic  heat  in  impact 
and  friction  over  ownership.  Whereas  it  has  long  been  vaguely 
recognizable  that  money  and  human  life  were  both  forms  of 
energy,  and  hence  were  transmutable  to  a  degree,  yet  it  has 
not  been  recognized  that  only  at  this  point  could  the  test  of 
transmutation,  under  the  cosmic  principle  of  the  conservation 
of  energy,  be  applied. 

Valuation,  on  the  other  hand,  is  the  price  in  money  set  upon 
this  same  commodity  when  delivered  to  its  Ultimate  Consumer 
through  the  market-system,  with  all  the  loss  of  efficiency  due 
to  commercial  impact  and  friction  added  thereto.  So  long  as 
any  commercialism  whatever  exists — that  is  to  say,  so  long  as 
any  ownership  is  permitted  in  industry  or  interchange,  any- 
where along  the  line — just  to  that  degree  valuation  must  exceed 
value,  when  both  are  expressed  in  money.  Valuation  will  exceed 
the  natural  price  by  the  cost  of  the  commercialism  parasitical 
thereto. 

Efficiency  of  Economic  Organization. — On  the  average, 
valuation  must  bear  the  same  proportion  to  value,  in  money,  that 
the  aggregate  human  energy  of  the  entire  industrial  and  com- 
mercial population  I  ears  to  that  portion  active  in  the  productive 
factory-system  alone.  For  society's  aggregate  industrial  and 
commercial  energy  constitutes  its  current  investment  in  the 
socio-economic  machine  or  process.  But  it  is  the  energy  active 
in  the  national  factory-system  alone  which  is  transmuted  into 
what  society  gets  out  of  its  investment — Life-support.  There- 
fore the  ratio  of  the  latter  to  the  former,  following  the  universal 


186  MODERN   ECONOMIC   TENDENCIES 

rule  for  computing  efficiencies,  must  measure  the  efficiency  of 
economic  organization  prevailing  at  the  time. 

This  proportion  of  useful  result  to  investment  of  effort,  it 
must  be  repeated  and  emphasized,  depends  not  at  all  upon  any 
question  as  to  the  efficiency  of  the  individual  members  of  so- 
ciety. All  that  interminable  mystery  has  been  eliminated  by 
our  basing  our  concept  of  efficiency  upon  the  mere  ratio  of 
whatever  aggregate  may  come  out  to  whatever  aggregate  may 
have  gone  in. 

Thus,  we  might  double  or  quintuple  the  average  personal 
efficiency  of  the  individuals  concerned;  yet,  if  we  did  nothing 
else,  we  should  not  have  altered  our  social  efficiency  thereby 
in  the  least.  We  should  be  getting  out  from  two  to  five  times 
as  much  as  before,  it  is  true;  but  we  should  also  be  putting  in 
from  two  to  five  times  as  much.  And  the  incidental  losses  of 
energy  in  commercial  combat  would  be  two  or  five  times  what 
they  were  before. 

This  proportion  of  true  value,  in  the  form  of  life-support  for 
the  Ultimate  Consumer,  which  lies  latent  within  the  expanded 
valuation  which  the  market-system  places  upon  any  commodity, 
has  always  been  less  than  one  hundred  per  cent.  That  is  to 
say,  there  has  always  in  the  past  been  some  economic  combat 
going  on,  some  dissipation  of  human  energy  in  struggle  over 
ownership.  But  it  is  only  within  recent  decades,  due  partly  to 
a  political  liberty  new  to  the  history  of  the  world,  and  partly 
to  an  unprecedented  rate  of  invention,  that  this  economic  dis- 
sipation of  energy  has  assumed  a  dominant  importance  in  social 
evolution  never  attained  at  any  earlier  period. 

But  just  as,  in  mechanics  or  physics,  or  chemistry,  or  elec- 
tricity, we  can  comprehend  phenomena  and  derive  exact,  in- 
telligible laws  only  when  our  equations  are  based  upon  some 
ideal  one-hundred-per-cent  hypothesis,  so  in  this  present  work, 
actual  economic  phenomena  must  be  studied  in  terms  of  an 
ideally  perfect  organization  of  economic  society.  Only,  in  this 
case,  all  that  is  asked  of  the  imagination,  as  its  picture  of  the 
ideally  perfect,  is  nothing  more  lovely  nor  unfamiliar  than  the 
homely  factory-system — but  a  factory-system  extended  to  fill 
completely  our  social  system — that  factory-system  which  has  now 
for  a  generation  or  two  comprised  some  nine-tenths  of  our 
active  population,  resulting  in  the  most  successful  production 
of  material  wealth  ever  known  to  history. 


THE   EFFICIENCY   OF   SOCIAL   ORGANIZATION  187 

We  know  no  better  economic  system  than  the  factory-system. 
The  ideal  one-hundred-per-cent  held  up  in  this  work  consists 
merely  in  a  frankly  complete  adoption  of  what  we  now  have — 
already  well  tried  and  zealously  approved  by  every  capitalist, 
employer  and  man-of -affairs — rather  than  any  chimerical  dream 
of  either  reforming  the  individual  into  some  heroic  superman 
nearer  the  angel,  or  of  devising  some  new  and  wonderful  con- 
formation of  society,  the  value  of  which  we  cannot  test  until 
after  we  have  committed  ourselves  wholly  to  it. 

In  any  such  an  ideal  one-hundred-per-cent  factory-system  as 
this,  values  and  valuations  would  be  identical.  Everyone  would 
be  organized  upon  the  non-owning,  salaried  or  wage-paid, 
monopoly-of-his-own-job  principle  of  the  factory.  No  energy 
would  be  wasted  in  determining  ownerships  where  ownership 
is  irrelevant  and  unnecessary.  No  two  nor  ten  men  would  be 
trying  to  do  one  man's  job.  No  twenty  men  would  be  trying 
to  do  what  no  one  wants  done.1 

Polling  the  Economic  Community. — In  attempting  to  apply 
statistically  to  modern  society  this  standard  of  comparison,  the 
first  task  is  to  list  accurately  all  human  skill  and  effort,  whether 
of  muscle  or  brain,  currently  devoted  to  the  placing  in  the 
hands  of  the  Ultimate  Consumer  of  all  that  which  supports 
his  life,  or  which  he  consumes  in  the  belief  that  it  supports 
life.  The  aggregate  of  all  this  human  energy  constitutes  the 
national,  productive  factory-system. 

The  aggregate  of  all  this,  in  money,  measures  our  current 
national  income  of  value.  It  is,  in  aggregate,  the  minimum 
or  natural  cost  toward  which,  as  a  goal,  skill  in  national  or- 

i  Anyone  who  feels  that  this  brief  reference  to  the  factory-system  as 
the  ideal,  one-hundred-per-cent  form  of  society  is  too  vague  can  find 
a  more  developed  picture  in  the  later  chapter  upon  Unemployment, 
Chapter  XX.  The  distinction  to  be  kept  in  mind  in  the  meantime,  in 
order  to  understand  the  author's  position,  is  that,  in  the  existing 
factory-system  no  one  factory  is  self-supporting.  It  makes  only  one 
narrow  line  of  commodities.  Its  members,  in  order  to  live,  must  ex- 
change what  they  produce,  through  the  intricate  channels  of  the  open 
market  outside,  for  what  they  need  to  consume.  Thus  their  lives  become 
dependent  upon  a  system  far  different  from  the  factory-system,  and 
they  «uffer  accordingly.  But  in  Chapter  XX  is  developed  a  picture 
of  a  single  factory  making  everything,  under  one  organization;  in 
which  case  the  members  would  buy  that  which  they  consume  under  the 
same  system  as  that  under  which  they  now  make  what  they  (virtually) 
sell — a  situation  far  different  from  the  present. 


188  MODERN   ECONOMIC   TENDENCIES 

ganization  may  hope  to  reduce  market-prices  to  the  Ultimate 
Consumer. 

Next  is  to  be  measured  statistically  the  skill  and  effort  cur- 
rently devoted  to  economic  combat  over  ownership,  price,  etc., 
or  dissipated  indirectly  by  such  ownership,  wherever  ownership 
is  sought  for  purposes  other  than  Ultimate  Consumption.  The 
aggregate  of  all  this  constitutes  the  national,  combative  market- 
system — or,  more  loosely,  commercialism. 

Aggregate  Economic  Energies. — The  grand  total  of  these  two 
classifications  or  aggregates  will  be  the  total  economic  energy 
put  forth  by  the  nation,  destined  either  to  conservation  or  dis- 
sipation respectively.  This  grand  total  measures,  for  the  nation, 
our  total  valuation,  or  retail  market-price. 

Ratio  of  Valuation  to  Value. — In  average  for  all  industries 
and  commodities,  the  valuation  or  market-price  to  the  Ultimate 
Consumer  must  bear  the  same  proportion  to  the  natural  cost 
that  the  grand  total  of  these  two  economic  aggregates  bears  to 
the  first  alone. 

The  Sheep  and  the  Goats. — Every  person  must  classify,  or 
his  activities  must  be  classified — or  his  consumption  must  be 
classified,  if  he  consumes  in  idleness — between  these  two  sorts 
of  social  economic  life,  factory-system  production  or  combative 
commercialism.  In  many  cases  the  life  of  an  individual  is  so 
intimately  divided  between  the  two  classes  that  consecutive  hours, 
or  even  minutes,  span  the  line  between.  But  this  fact  must 
never  be  allowed  to  confuse  us  as  to  the  diametrically  opposite 
natures  of  the  two  sorts  of  economic  energy.  In  the  fine 
metabolism  of  nature  the  one  produces  social  happiness,  and 
the  other  unhappiness,  as  certainly  and  as  accurately  as,  within 
the  mysterious  obscurities  of  our  own  bodies,  each  molecule  of 
food  produces  life  and  poison  death. 

In  this  statistical  determination  due  consideration  must  be 
given,  of  course,  to  both  the  poll,  or  numbers  involved,  on  the 
one  hand,  and  to  relative  ability  on  the  other.  Proper  estimate 
must  be  made  of  the  relative  weight  of  brains  and  brawn.  All 
this  will  receive  attention.  The  aggregates  which  we  seek  are 
those  of  human  energies,  regardless  of  whether  muscular  or 
intellectual. 

American  Economic  History. — Speaking  briefly  in  anticipa- 
tion of  the  further  development  of  our  analysis,  the  tracing  of 
the  relative  growth  of  these  two  contrasted  sorts  of  economic 


THE   EFFICIENCY   OF   SOCIAL   ORGANIZATION  189 

energy  through  recent  American  history  will  show  that,  previous 
to  about  the  middle  of  the  nineteenth  century,  the  western 
world  had  been  so  pre-occupied  with,  or  exhausted  by,  political 
or  military  combat,  or,  in  America,  by  struggle  against  the 
physical  obstacles  of  a  virgin  continent,  that  economic  combat, 
or  commercialism,  had  had  no  appreciable  opportunity  to  de- 
velop. But  during  the  last  century,  and  more  particularly  dur- 
ing its  later  decades,  comparative  political  stability  and  military 
peace,  with  the  completion  of  our  exploration  of  the  North 
American  continent,  have  opened  opportunity  for  a  brilliant 
acceleration  of  invention,  resultant  in  a  rapid  growth  and  un- 
precedented unification  of  vast  populations. 

The  concurrent  reaction  of  this  invention,  upon  the  huge 
population  for  whose  existence  it  is  itself  responsible,  has  re- 
sulted in  a  phenomenal  growth  of  systematic  (or  anarchic) 
economic  combat,  or  commercialism,  so  unprecedented  as  to 
warrant  the  characterization  of  the  present  era  as  distinctly 
the  commercial  one  of  all  history.  It  is  to  trace  more  accurately 
this  commercial  development  which  is  the  first  task  in  attempt- 
ing to  understand  American  history. 

The  chronological  limits  of  this  commercial  era,  it  will  be 
admitted,  cannot  be  too  rigidly  defined.  Its  beginning,  as  was 
noted  in  Chapter  I,  really  occurred  in  the  eighteenth  century, 
as  the  result  of  invention,  forming  the  final  cause  of  the  eradica- 
tion of  the  last  vestiges  of  the  feudal  system.  Interrupted  by 
the  Napoleonic  wars,  it  got  a  second  start  during  the  second 
quarter  of  the  nineteenth  century.  Arrested  momentarily  again 
by  the  Prussian  wars  and  our  own  Civil  War  of  the  eighteen- 
sixties,  it  rebounded  into  a  marked  acceleration  throughout 
the  period  extending  from  1865,  say,  into  the  present  century. 
Its  final  acceleration  (previously  to  the  Great  European  War) 
was  derived  from  the  war  between  Spain  and  this  country  in 
1898. 

Feeding  upon  the  plethora  of  peace,  stimulated  by  the  filling 
of  the  American  continent  with  people,  and  drunken  with  the 
absinthe  of  war-credits,  human  energy,  barred  outlet  to  other 
sorts  of  strenuousness,  has  turned  feverishly  to  the  development 
of  commercialism.  The  modern  phenomenon  of  free  economic 
combat,  with  all  its  brilliant  trappings  and  military  enthusiasm, 
has  leaped  into  prominence  as  a  gayly  colored  but  poisonous 
mushroom  springs  from  rich  mold  after  rain. 


190  MODERN    ECONOMIC   TENDENCIES 

Commercialism,  with  its  atmosphere  of  gigantic  profits,  im- 
perial luxury  and  arrogance  of  success,  has  proved  extremely 
alluring.  Hosts  have  dropped  their  productive  tasks  to  hasten 
into  its  ranks.  Even  educated  men,  specially  devoted  to  social 
studies,  have  been  unable  to  perceive  its  hollow  fraud.  But 
a  frank  and  scientific  analysis  of  this  mushroom-institution 
reveals  no  real  nutriment  and  much  virulent  poison. 

As  this  growth  has  occurred  increasingly,  the  modern  social 
problem  has  arisen.  With  technical  aids  to  production  never 
so  efficient  in  the  past,  society  is  yet  daily  becoming  more  dis- 
satisfied with  what  it  has.  With  means  for  cheapening  the 
production  of  commodities  such  as  previous  generations  could 
never  have  imagined,  costs  and  prices  are  everywhere  rising. 
While  the  efficiency  of  the  individual  is  everywhere  being  magni- 
fied by  experts  in  education,  the  efficiency  of  economic  society 
as  a  whole  is  everywhere  obviously  declining,  through  neglect 
of  national  economic  organization. 

It  is  this  last  huge  topic  which  constitutes  the  real  task  at 
hand,  in  this  present  historical  study  of  American  economic 
evolution.  We  shall  study  it  as  the  most  important  efficiency 
involved  in  modern  life. 


CHAPTER  IX 

THE   WEAPONS    OF    COMMERCIAL    COMBAT 

THE  task  in  hand,  it  has  been  explained,  is  the  statistical 
tracing  of  the  degree  to  which  American  institutional  relation- 
ships have  been  guided  into  economic  inefficiency  by  the  gradual 
growth  of  the  market-system — or  commercialism — under  the 
stimulus  of  invention,  combined  with  unprecedented  political 
liberty  and  topographical  freedom.  But  this  task  cannot  be 
taken  up  in  detail  until  a  better  understanding  has  been  had 
of  the  subdivisions  of  this  intricate  market  or  commercial  system. 
This  is  best  attained  by  a  study  of  the  several  weapons  utilized 
in  commercial  warfare,  and  of  the  methods  of  their  use. 

In  military  combat  the  manner  of  campaign  is  most  varied. 
In  one  place  occurs  the  headlong  charge,  in  another  ambush,  in 
another  intrenchment,  with  counter-sapping,  mining  and  avia- 
tion; in  another  persistent  siege,  or  blockade  of  trade,  or 
espionage,  and  so  on.  And  in  each  sort  of  warfare  a  different 
weapon  is  used.  There  is  no  art  of  peace  which  is  more  varied 
in  its  accouterments  than  that  of  war. 

Nor  is  the  destruction  resultant  from  war  only  that  inflicted 
directly  upon  one  combatant  by  another.  Much  of  it,  and 
usually  the  most  horrid  part,  falls  upon  non-combatants  and 
is  merely  incidental  to  the  main  action.  Sometimes  it  is  in- 
tentional, but  more  often  not;  but  in  either  case  it  is  equally 
painful. 

Both  of  these  statements  are  equally  true  of  both  political 
and  commercial  militarism.  Indeed,  the  parallelism  between  the 
two  will  come  out  continually,  the  more  one  studies  commercial- 
ism. In  commercial  combat  the  manner  in  which  the  fighter — 
or  he  who  profiteers  from  the  fight  of  others — puts  the  pressure 
upon  the  Ultimate  Consumer,  to  force  him  to  disgorge,  is  most 
varied.  It  is  often  indirect  and  often  unintentional,  so  far  as 
hitting  the  Ultimate  Consumer  is  concerned;  but  it  always  hits 
him,  nevertheless. 

191 


192  MODERN   ECONOMIC  TENDENCIES 

The  instruments  utilized  in  the  extortion  sweep  through  a 
like  range  of  variety.  But  all  of  these  instruments  or  methods 
may  be  segregated  into  a  few  broad  classes,  as  follows : 

(1)  Passive  Control  of  Land,  or  Site; 

(2)  Passive    Control    of    Appliances,    including    Buildings, 
Tools,  etc.; 

(3)  Active  Control  of  Appliances,  Markets  or  Avenues  of 
Interchange ; 

(4)  Indirect  Waste  of  Value  Incidental  to  the  Direct  Combat 
—this  last  being  probably  the  largest  of  the  list. 

In  analyzing  all  of  these  sorts  of  commercial  combat  we  shall 
take  not  the  slightest  heed  of  whether  the  combatants  are  in- 
spired by  malice,  or  other  immoral  impulse,  or  not ;  nor  whether 
they  are  conscious  of  doing  harm  or  not.  Most  of  them  are 
doubtless  guided  by  a  sincere  belief  in  the  righteousness  of 
their  acts.  Only  occasionally  does  sheer  malice  rear  its  head. 
But  to  whatever  degree  these  things  may  or  may  not  be  true, 
we  are  concerned  here  not  at  all  in  motives,  but  only  in  the 
net  economic  results  to  the  community  as  a  whole. 

As  a  means  to  prosecuting  the  analysis  these  following 
definitions  must  be  noted: 

(A)  Productivity  and  Wages 

All  moneys  paid  to  any  person  for  activity  in  any  of  the 
many  varied  departments  of  production  of  life-support,  in  the 
factory-system  in  its  broadest  sense,  as  defined  above,  are 
properly  to  be  called  wages. 

This  idea  of  wages,  it  is  to  be  noted,  is  quite  different  from 
the  ordinary  use  of  the  term,  which  turns  merely  upon  the  fact 
of  money  paid  for  time-effort.  But  in  this  present  analysis 
we  are  interested  not  at  all  in  the  particular  form  of  the  work- 
man's income,  whether  it  be  paid  by  the  hour,  day,  week,  month, 
year,  piece  or  job,  nor  whether  it  comes  in  the  form  of  com- 
missions, rebates,  fees,  contracts,  etc.,  nor  whether  paid  outright 
by  an  employer  or  deducted  by  the  man  himself  (as  the  pro- 
prietor of  the  business)  from  gross  receipts,  nor  whether  it 
reaches  him  in  a  yellow  envelope  or  a  white  one,  nor  whether  in 
specie  or  by  check. 

It  is  the  character  of  the  deed  performed,  and  not  of  the  pay 
received,  which  classifies  economic  energy.  The  sole  determinant 


THE   WEAPONS   OF   COMMERCIAL   COMBAT  193 

of  true  wages  is  that  it  shall  be  received  for  effort  which  really 
aids  in  the  transformation  or  transportation  of  the  raw  material 
of  the  field,  forest,  mine  or  sea  into  the  hands  of  its  Ultimate 
Consumer,  overcoming  only  natural  and  inevitable  obstacles, 
under  fully  informed  and  unperturbed  guidance  by  the  Ultimate 
Consumer,  expressing  itself  through  the  familiar,  time-honored 
factory-system. 

This  use  of  the  word  wages  is  of  course  different  from  the 
ordinary  one,  in  its  limits,  although  in  many  cases  the  thing 
usually  called  wages  is  actually  true  wages,  as  defined  here. 
But,  on  the  other  hand,  many  payments  now  called  wages 
cannot  be  rationally  classed,  we  shall  find,  with  true  wages, 
because  contrasted  therewith  in  both  origin  and  effect.  More- 
over, there  are  many  payments  now  current  which  no  one  now 
thinks  of  calling  wages,  yet  which  must  surely  be  brought  in 
under  the  term,  because  they  are  identical,  in  both  origin  and 
result,  with  those  wages  which  most  truly  represent  the  idea 
intended  by  the  term,  namely :  return  by  society  in  money-form, 
to  the  producer  of  life-support,  of  the  value  of  what  he  pro- 
duces for  society. 

Thus  a  retail  shop-keeper,  for  instance,  when  he  really  per- 
forms a  service  for  the  Consumer,  as  is  sometimes  true,  must 
have  his  income  classed  as  wages,  rather  than  profits,  because  it 
has  been  earned  in  supplying  life-support  to  the  Ultimate  Con- 
sumer. The  fact  that  he  may  derive  it  in  the  form  of  a  margin 
between  his  buying  and  selling  prices  makes  no  difference  to  its 
effect  upon  the  community.  It  is  the  effect  of  the  effort,  and 
not  the  form  of  the  pay,  which  counts  in  classifying  incomes. 

On  the  other  hand,  a  printer  of  advertising-matter,  or  a 
ticket-seller,  or  a  typist  writing  negotiative  letters,  or  the  usual 
book-keeper,  must  have  his  income  and  energy  classed  as  com- 
mercial, rather  than  under  wages,  because  it  has  been  earned 
in  aiding  commercial  combat.  The  fact  that  it  may  have  been 
paid  to  him  by  an  employer  in  the  form  of  time-wages  has 
nothing  to  do  with  its  effect  upon  society. 

Real  versus  Apparent  Demand. — Incidentally  to  the  deter- 
mination of  what  is  wages  and  what  is  not,  it  must  be  noted 
that  the  Consumer,  under  the  present  system,  apparently  "de- 
mands," as  he  buys,  a  lot  of  things  and  services  which  are  con- 
demned herein  as  of  no  use  to  him.  But  this  he  does,  not 
because  he  really  desires  these  things,  nor  because  he  is  con- 


194  MODERN    ECONOMIC   TENDENCIES 

scious  of  offering  money  for  them,  but  because  he  is  by  no 
means  fully  informed  as  to  how  his  money  is  spent  for  him  by 
the  dealer  who  handles  it.  Indeed,  this  destination  of  his 
money  is  carefully  concealed,  and  this  concealment  is  protected 
by  law. 

Or,  even  if  the  Consumer  suspects  undesired  and  unauthor- 
ized uses  of  his  money  by  the  dealer  who  acts  as  his  agent,  he 
lacks  all  power  to  stop  the  procedure.  For  his  freedom  of  choice 
in  the  open  market,  under  "free"  competition  (of  which  he  is  so 
jealously  proud),  amounts  only  to  a  choice  between  several  such 
dealers,  all  of  whom  are  doing  substantially  the  same  thing. 
Each  is  virtually  like  all  the  rest  in  his  charging  the  Consumer 
for  a  lot  of  expenses  for  commercial  competition  which  the  latter 
in  no  wise  desires,  and  which  do  the  Consumer  no  good,  but 
rather  harm,  and  which  the  Consumer  has  never  authorized. 

The  Consumer  normally  does  not  know  what  he  is  buying, 
nor  how  it  was  made  or  procured.  Even  those  factories  which 
are  most  open  for  inspection  use  all  manner  of  materials  re- 
garding the  natural  cost  or  the  purity  of  which  even  the  factories 
themselves  are  ignorant;  or,  if  informed,  they  are  as  helpless 
for  reform  as  is  the  Ultimate  Consumer.  Virtually  all  for 
which  they  can  be  held  responsible  is  what  happens  on  their 
own  premises.  Under  commercial  competition  they  either  must 
buy  cheap  or  else  go  out  of  the  business. 

While  a  minority  of  factories  may  be  able  to  evade  this  al- 
ternative, through  the  possession  of  unusual  skill  or  energy, 
yet  over  the  heads  of  the  majority  it  has  always  held  sway  as 
immutably  as  the  law  of  gravitation.  The  one  formula  which 
has  never  been  of  the  slightest  use  in  reforming  anything  is 
that  calling  upon  the  weaker  members  of  the  race  to  be  as 
strong  as  the  most  successful.  Civilization  consists  rather  in 
protecting  the  weak,  that  they  may  grow  in  strength. 

But  even  where  both  Consumer  and  manufacturer  feel  assured 
of  the  purity  of  materials,  the  former  may  rest  assured  of  a 
gross  adulteration  of  price  by  the  manufacturer,  by  his  inclusion 
within  it  of  various  costs  of  commercial  combat,  both  in  buying 
materials  and  in  selling  the  product.  The  factory  may  throw 
open  to  the  public  its  work-rooms,  but  it  never  does  its  ledgers ! 
The  Consumer  knows  with  certainty  only  one  thing  about 
everything  he  buys,  provided  he  inquires  at  all,  and  that  is  that 
all  of  his  competing  purveyors  are  charging  him,  over  and  above 


THE   WEAPONS   OF   COMMERCIAL   COMBAT  195 

the  natural  cost  of  what  he  desires,  the  unnatural  and  unneces- 
sary costs  of  a  battle  between  themselves. 

Political  versus  Economic  Government. — This  sort  of  adul- 
teration of  the  dollar  the  political  government  is  constitution- 
ally powerless  to  prevent.  Indeed,  there  exists  nowhere  upon 
earth  any  government  possessing  the  authority  to  prevent  it. 
So  far  as  the  author  is  aware,  no  such  form  of  government 
has  ever  been  even  suggested. 

This  is  the  first  definite  item  of  fact,  among  many  which  may 
be  urged  later,  in  support  of  the  statement  already  made  that 
we  are  not  governed,  to-day,  by  our  political  government,  but 
by  our  economic  institutions  and  traditions.  These  institu- 
tions we  may  be  able  to  alter,  but  not  through  the  functions 
of  our  political  government. 


(B)  Commercialism  and  Diluits 

When  one  turns  from  productive  wages  to  the  contrasted 
moneys  and  energies  of  the  commercial  field,  new  terms  become 
necessary.  So  undesirable  is  the  coining  of  strange  words  that 
this  entire  section  of  the  book  was  written  several  times  over, 
using  only  the  familiar  word  "profits"  to  designate  these  moneys. 

But  the  result  was  hopeless  confusion.  The  word  profits 
has  now  long  been  used  in  the  commercial  world  so  loosely  that 
it  has  lost  all  accuracy  of  force  or  meaning.  However  carefully 
it  might  be  re-defined  in  advance  in  this  book,  there  would 
surely  arise  situations  wherein  the  reader's  previously  fixed 
ideas  as  to  profits  would  lead  to  misunderstanding. 

Moreover,  the  situation  demands  at  least  two  new  terms,  to 
indicate  two  novel  distinctions  in  economic  argument.  If  the 
word  profits  were  retained  for  one  of  these,  the  reader  would 
inevitably  attach  to  the  new  term  used  for  the  other  a  con- 
trast with  what  he  had  always  had  in  mind  as  profits,  whatever 
that  might  be. 

Therefore  the  only  way  to  insure  a  distinct  understanding 
of  these  new  and  more  accurate  ideas  is  to  use  two  novel  names 
for  them.  Although  these  two  terms  are  to  cover  economic 
quantities  which  largely  consist  of  the  many  different  things 
which  are  commonly  called  profits,  yet  the  aim  is  to  distinguish 
from  the  common  idea  of  profits. 


196  MODERN   ECONOMIC   TENDENCIES 

DiluitS. — For  all  the  different  sorts  of  income  which  are  not 
wages  as  defined  above,  therefore,  when  considered  in  aggregate, 
will  be  used  the  word  diluits. 

The  word  diluits  is  based  upon  the  same  Latin  derivation 
as  diluents,  and  is  intended  to  convey  the  same  significance, 
merely  the  termination  being  altered  into  similitude  with 
profits.  For  it  will  be  established  later  that  all  moneys  and 
efforts  here  classified  as  diluits  serve  merely  to  dilute  the  pur- 
chasing-power of  the  Consumer's  every  dollar,  wherever  through- 
out the  land  it  may  be  spent,  by  whatever  sort  of  a  spender, 
or  for  whatever  sort  of  goods  or  services. 

This  is  the  basic  idea  with  which  the  reader  is  to  step  from 
our  illustration  of  the  factory  imaginably  permeated  with  own- 
ership-in-industry  into  the  field  of  money  as  a  measure  of  human 
energy. 

Under  the  broad  heading  of]  diluits  of  commercialism  come 
these  following  sub-classifications  of  income: 

( 1 )  Rent. — The  money  extracted  from  the  Consumer  through 
the  control  of  Land — or  more  properly,  Site — is  Rent. 

The  word  rent  is  now  commonly  used  to  include  income  de- 
rived from  the  ownership  of  buildings,  as  well  as  land;  but 
this  is  improper.  Income  from  buildings  should  properly  be 
called  interest.  This  is  so  because  buildings  are  a  fruit  of  labor, 
whereas  site  is  not.  Income  from  ownership  of  the  fruits  of 
labor  classifies  as  interest,  in  contradistinction  with  rent  as 
income  from  the  ownership  of  site. 

In  its  effect  upon  society  in  general,  and  upon  the  Ultimate 
Consumer  in  particular,  this  distinction  between  rent  and  in- 
terest possesses  no  weight  whatever.  The  two  are  equally 
burdensome  and  equally  unjust.  But  because  the  single-tax 
doctrines  have  given  a  prominence  to  this  distinction  which  we 
feel  it  does  not  deserve,  it  is  important  to  have  it  at  least  ac- 
curately defined  in  mind. 

(2)  Interest  and  Dividends. — The  money  extracted  from  the 
Ultimate  Consumer  through  the  control  of  artificial  appliances, 
including  buildings  as  well  as  tools,  etc.,  will  be  called  interest 
or  dividends  indiscriminately. 

In  the  commercial  world  there  is  a  technical  difference  be- 
tween interest  and  dividends,  but  this  is  of  no  consequence  in 
a  scientific  analysis  made  from  the  standpoint  of  the  Consumer. 
Both  interest  and  dividends  are  squeezed  from  the  Consumer 


THE   WEAPONS   OF   COMMERCIAL   COMBAT  197 

by  a  pressure  of  passive  ownership  of  things  made  by  man  and 
needed  in  industry.  They  stand  in  contradistinction  to  rent, 
on  the  one  hand,  which  is  extracted  by  passive  control  of  a  site 
originally  made  valuable  by  God,,  and  enhanced  by  the  efforts 
of  society  as  a  whole;  and  in  further  contradistinction,  on  the 
other  hand,  with  value  extracted  from  the  Consumer  by  the 
active  exertions  of  commercial  combat — a  form  of  economic 
dissipation  to  receive  a  name  below. 

The  term  dividends  as  used  in  the  commercial  world  is 
broader  than  mere  interest,  for  dividends  are  in  actuality  often 
paid  from  funds  accumulated  through  rent,  interest,  profits  and 
surplus  together.  But  since  dividends  are  justified  in  the  eyes 
of  the  commercial  world  by  their  percentage-relation  to  capital 
invested,  quite  in  parallel  and  in  fluid  equilibrium  with  interest, 
the  term  will  be  used  here  indiscriminately  with  interest. 

It  will  be  noted  that  this  classification  ignores  any  idea  that 
interest  is  paid  by  the  borrower.  This  is  intentional.  The 
borrower  is  merely  an  agent  of  the  Ultimate  Consumer.  He 
is  an  unauthorized  agent,  it  is  true ;  but  that  makes  him  no  less 
an  agent. 

For  the  Ultimate  Consumer  is  the  only  person  who  can,  and 
the  only  one  who  actually  does,  pay  all  interest  and  dividends. 
The  borrower  is  not  possibly  a  source  of  economic  energy,  as 
is  the  Consumer.  He  might  become  one  by  turning  Consumer, 
or  he  might  become  a  source  of  biological  energy  by  turning 
producer.  But  as  a  mere  borrower  he  is  neither.  Therefore 
he  cannot  pay  interest.  Not  paying,  he  has  no  rightful 
authority. 

(3)  Entropits.— The  moneys  extracted  from  the  Ultimate 
Consumer  by  the  Active  Control  of  Appliances,  Markets  or  Op- 
portunities for  Interchange  will  be  called  entropits.  That  is 
to  say,  whereas  the  terms  rent  and  interest  cover  destructive 
passivity  in  owner ship-in-industry,  the  term  entropits  covers 
destructive,  dissipative  activity  in  ownership-in-industry. 

This  word  entropits  has  been  coined  from  the  same  Greek 
base  as  the  word  entropy,  which  was  invented  by  Professor 
Clausius  in  1865  to  cover  what  proved  later  to  be  the  dis- 
gregation  of  the  molecule,  in  heat  action,  and  the  dissipation 
of  the  energy  present,  by  such  processes  as  friction,  impact,  con- 
duction or  radiation.  The  terminal  syllable  has  been  altered 
into  similitude  with  the  word  profit. 


198  MODERN   ECONOMIC   TENDENCIES 

All  of  these  processes  are  antagonistic  and  dissipative  in  their 
nature,  in  contradistinction  to  the  conservative  processes  upon 
which  efficiency  in  thermodynamic  action  (the  production  of 
power  from  heat)  depends.  They  are  all  active  in  their  nature. 
Therefore  they  correspond  scientifically  with  the  dissipation  of 
energy,  in  the  economic  field,  in  commercial  friction  and  im- 
pact over  ownership-in-industry. 

The  idea  of  entropits  parallels  roughly  what  is  commonly 
known  as  gross  profits.  It  excludes,  however,  those  things  com- 
monly classed  as  profits  which  have  been  shown  above  to  be 
really  wages,  rent  or  interest.  The  distinguishing  character- 
istic of  entropits  is  that  it  covers  only  moneys  received  for 
activity  concerned  with  price,  ownership  or  opportunity  for 
interchange ,  as  distinguished  on  the  one  hand  from  wages 
received  for  activity  in  production,  and  on  the  other  from  in- 
terest derived  from  passivity  in  ownership-in-industry. 

As  with  the  other  sorts  of  income,  the  classification  has 
nothing  to  do  with  the  form  of  payment,  nor  with  any  distinct 
funds.  A  single  check  or  pay-envelope  may  include  portions  of 
wages,  rent,  interest  and  entropits,  intermingled  together,  with 
no  book-keeper  sufficiently  skilled  to  tell  one  from  the  other. 
But  in  the  fine  metabolism  of  economic  society  the  contrasted 
human  energies  represented  by  each  of  these  are  distinguished, 
as  to  result  upon  society,  as  unerringly  as  the  walls  of  the 
stomach  distinguish  the  molecules  of  food  from  those  of  poison, 
and  both  from  inert  foreign  matter. 

(3a)  Costs  of  Doing  Business. — The  term  entropits  is  a  gross 
one,  and  includes  the  moneys  paid,  often  in  the  form  of  wages, 
to  hirelings  who  aid  the  commercialist  in  his  combat,  but  who 
have  no  share  in  the  risk  or  reward.  Such  moneys  are  com- 
monly called  the  costs  of  doing  business — although  this  last, 
as  commonly  used,  normally  includes  rent  and  interest  also. 
Here  the  term  "cost  of  doing  business"  will  be  reserved,  when 
accuracy  is  of  importance,  to  mean  only  wages  or  salaries  paid 
for  active  aid  in  commercial  combat.  After  such  costs  have 
been  deducted,  entropits  becomes  our  scientific  parallel  with  what 
is  commonly  called  net  profits. 

All  of  these  distinctions  will  become  clear  if  it  be  kept  in 
mind  that  we  are  no  longer  attempting  to  classify  forms  of 
income  itself,  which  was  the  self-imposed  task  of  the  earlier 


THE  WEAPONS  OF   COMMERCIAL   COMBAT  199 

economists,  but  forms  of  social  function  by  which  the  income 
is  acquired. 

The  distinction  between  gross  entropits  and  net  profits  is  not 
an  important  one  in  effect,  but  merely  for  clarity  of  thought. 
Whether  the  moneys  extracted  from  the  Ultimate  Consumer  by 
commercial  impact  and  friction  be  paid  out  as  wages,  to  hire- 
lings whose  productive  abilities  have  been  diverted  to  waste  by 
the  commercialist-employer,  or  remain  in  the  latter's  hands  as 
net  profits,  is  all  one  to  society  as  a  whole.  In  either  case 
they  constitute  sheer  waste,  and  serve  only  to  dilute  the  pur- 
chasing-power of  the  Consumer's  dollar. 

Indeed,  some  of  the  enterprises  most  burdensome  to  the  Con- 
sumer make  little  or  no  net  profits.  This  is  true  of  all  those 
businesses  which,  as  reported  by  their  owners,  have  all  their 
profits  eaten  up  in  competition. 

Some  of  the  current  leaks  of  purchasing-power  which  are 
most  burdensome  to  the  poor,  on  the  other  hand,  take  the 
form  of  a  distribution  of  wages  to  workers  who  are  as  poor 
and  underpaid  as  are  those  whom  their  work  impoverishes. 
Such  workers,  indeed,  impoverish  themselves.  This  is  largely 
true  of  such  wage-earners  as  stenographers,  bookkeepers  and 
office-cleaning  women,  for  instance,  who  aid  the  commercial 
fighters. 

This  distinction  between  net  entropits  and  cost  of  doing 
business  bears  as  heavily  upon  the  issue  raised  by  orthodox 
socialism  as  does  that  raised  by  the  single-tax  doctrines  upon 
the  distinction  between  rent  and  interest.  The  socialists  lay  all 
blame  for  poverty  upon  capitalism.  Yet,  as  a  matter  of  fact, 
a  large  and  increasing  portion  of  it  rests  upon  wage-earners. 

To  be  sure,  these  wage-earners  may  be  morally  guiltless,  be- 
cause helpless  to  alter  the  situation.  But  so  also  must  the 
capitalists  appear  to  be,  the  more  carefully  one  examines  the 
situation. 

This  classification  of  commercial  incomes  and  energies,  being 
unfamiliar,  needs  further  examination  in  detail. 

Rent. — At  the  basis  of  every  economic  system  lies  the  quest- 
tion  of  rent,  the  plan  by  which  society  distributes  to  its  mem- 
bers various  sites,  of  divers  values,  for  their  use  and  enjoyment. 
For  before  one  may  enter  the  questions  which  attach  to  the 
equities  of  other  forms  of  wealth,  sites,  with  their  relative 
advantages  and  disadvantages,  form  the  first  threshold  to  pro- 


200  MODERN    ECONOMIC   TENDENCIES 

ductive  opportunity  of  any  sort  whatever.  It  is  the  obviousness 
of  this  fact  which  has  led  to  the  prominence,  in  all  agitation 
for  reform,  of  the  land-question.  It  is  this  which  explains  the 
wide  favor  of  the  single-tax  program. 

Now  sites  are  unquestionably  the  creation  of  God,  as  to 
topography,  and  of  society  as  to  their  environment.  Therefore, 
as  a  matter  of  obvious  equity,  no  one  may  lay  claim  to  owner- 
ship of  any  site  without  both  blasphemy  against  God  and 
treason  against  society. 

For  instance,  the  rental  value  which  Manhattan  Island  pos- 
sessed in  Henry  Hudson's  time  was  created  by  God,  and  so 
obviously  belongs  to  society  as  a  whole.  That  which  it  has 
acquired  since  then  is  due  to  the  activities  of  society  as  a  whole, 
and  therefore  belongs  to  society  as  a  whole. 

The  use  of  a  site,  as  of  a  tool  in  a  factory,  must  naturally 
be  reserved  to  the  individual,  in  order  that  productive  enter- 
prise may  proceed.  But  the  current  value  thereof,  as  dis- 
tinguished from  the  user's  wages,  due  to  time-effort,  he  must 
render  to  society,  as  true,  natural  rent. 

What,  from  this  point  of  view,  is  the  natural,  the  ideal,  the 
"hundred-per-cent"  nature  of  rent?  Further,  have  we  gained 
or  lost  by  our  departure  from  it  in  our  inheritance  and  main- 
tenance of  the  present  system  of  private  ownership  in  land? 

Since  society  as  a  whole  has  inherited  the  right  to  all  natural 
advantage  of  every  site,  and  has  actually  created  every  artificial 
advantage,  all  payments  of  rent  must  be  made,  in  effect,  to 
society  as  a  whole.  As  to  the  amounts  of  such  payments,  they 
would  naturally  be  fixed,  under  any  system,  as  apparently  they 
are  now,  by  equilibrium  between  supply  and  demand,  determined 
by  auction  from  time  to  time.  Under  any  just  system  simple 
precautions  will  be  taken  against  undue  hardship  or  injustice 
in  evicting  a  holding  tenant.  But  this  once  said,  the  land  must 
always  be  held  available  for  the  needs  of  society's  growth,  and 
the  rights  of  any  tenant  subservient  to  the  interests  of  society 
as  a  whole. 

These  payments  of  rent,  made  to  and  expended  for  society 
as  a  unit,  would  most  naturally  go  toward  public  service  or 
improvements.  But  however  this  might  be  in  detail,  in  effect 
it  must  amount  to  a  distribution  of  the  whole  to  all  citizens, 
each  citizen  receiving  his  share  upon  the  basis  of  that  equality 


THE  WEAPONS   OF   COMMERCIAL   COMBAT  201 

before  the  state  which  has  long  been  held  and  proven  to  be 
foundation  of  all  our  liberties. 

Thus  the  net  effect  of  this  natural  or  hundred-per-cent 
system  of  rent  would  be  that  each  citizen  would  enjoy  an  equal 
income  from  rent.  His  outgo  might  be  what  he  pleased,  but 
his  income  would  be  fixed,  so  far  as  true  rent  is  concerned.,  and 
equal  to  that  of  all  his  neighbors. 

Hence  every  citizen  electing  to  enjoy  a  site  above  the  average 
in  productivity  would  pay  more  rent  to  the  community  than 
he  received.  He  would  thus  pay  net  rent.  But  each  person 
electing  to  enjoy  a  site  of  less  than  the  average  productivity, 
on  the  other  hand,  would  pay  less  rent  than  he  received.  He 
would  therefore  enjoy,  in  effect,  an  income  of  net  rent,  received 
in  some  form  of  life-support  or  another,  if  not  in  money. 

Receipt  and  Payment  of  Rent. — Now  what,  as  a  mere  ques- 
tion of  pecuniary  gain  rather  than  of  equity,  is  the  position 
of  the  average  citizen,  under  our  present  system  of  rent,  in 
contrast  with  this  natural,  hundred-per-cent  system?  Take  for 
illustration  the  common  case  of  a  family  in  medium  circum- 
stances which  enjoys  a  moderate  income  of  wages  or  salary, 
helped  out  by  rent  or  interest  or  dividends  from  the  ownership 
of  a  small  property — for  the  illustration  applies  equally  to  any 
of  these  three. 

There  is  no  class  of  society  which  opposes  so  bitterly  as  this 
any  plan  for  the  abolition  of  rent,  interest  or  dividends.  It 
can  see  only  that  it  loses  something.  The  fact  that  it  might 
gain  far  more  than  it  loses  never  "gets  through." 

Yet  what  is  the  actual,  net  fact?  Such  a  family,  each  time 
it  spends  a  dollar  across  the  shop-counter,  is  paying  rent,  in- 
terest and  dividends  upon  untold  valuations  and  intricacies  of 
site,  building  and  appliance,  in  factory,  warehouse,  railway, 
etc.  Indeed,  a  major  fraction  of  the  family's  entire  income 
must  go  to  pay  these  tributes  to  commercial  warfare,  including 
profits  and  contributive  costs,  which  do  it  no  atom  of  good. 
Reserving  figures  for  later  use,  it  may  be  said  that  if  all  these 
useless  features  of  commercial  cost  were  cut  out  this  family 
could  buy  and  enjoy  at  least  twice  as  much  as  now,  on  wages 
or  salary  alone,  as  compared  with  gross  income,  including  rent 
received,  now.  But  the  advocate  of  commercialism  never  stops 
to  think  that  far. 


202  MODERN  ECONOMIC  TENDENCIES 

Inertia. — The  author  knows  of  no  school  of  social  philosophy 
which  urges  that  the  present  plan  of  private  ownership  of 
land-valuations  offers  any  advantages  over  the  natural  one.  It 
has  been  inherited  without  question  from  the  past.  It  stays 
solely  as  the  guest  of  mental  and  social  inertia. 

The  splendid  gospel  as  to  the  nature  of  rent  which  was 
preached  forty  years  ago  by  Henry  George  has  received  wide 
academic  debate,  it  is  true,  and  its  sound  core  has  furnished 
seed  which  has  rooted  deeply  in  American  public  opinion.  An 
important  proportion  of  all  thinking  people  are  single-taxers. 
But  the  movement  still  remains  academic  in  form. 

Yet  Henry  George  was  deeply  in  error  in  ascribing  all 
economic  ills  to  the  private  ownership  of  land  alone,  and  this 
error  is  now  generally  recognized  in  liberal  circles.  For  own- 
ership in  land  is  in  no  wise  demarked  from  that  of  the  other 
features  needed  for  industry.  Some  of  the  heaviest  and  most 
unnatural  burdens  borne  by  the  Consumer  come  from  activities 
which  make  little  or  no  use  of  land,  and  which  would  remain 
unaffected  by  any  conceivable  reform  in  rent.  Capitalism  can 
be  transferred  from  ownership  of  land  to  other  ownership-in- 
industry  in  perfect  fluidity,  without  dulling  in  the  least  its 
effectiveness  against  the  interests  of  the  Ultimate  Consumer. 

Land-titles. — Historically  the  original  titles  to  land,  both  here 
and  in  Europe,  go  back  to  claims  resting  upon  pure  combat, 
either  military  or  commercial.  The  lands  were  not  only  won 
by  combat,  but  they  have  been  held  ever  since  for  that  same 
purpose,  in  effect. 

To  a  degree,  it  is  true,  the  titles  to  farm-lands  in  this  country 
(if  we  overlook  Indian  rights)  go  back  to  squatter  or  home- 
stead rights.  But  the  bulk  of  such  rights  were  secured  from 
the  government  for  speculative  rather  than  productive  purposes. 
Much  of  this  land  has  since  been  absorbed  into  towns  and  cities, 
and  has  undergone  transfer  after  transfer,  each  adding  its 
increment  of  valuation,  each  converting  more  completely  the 
spirit  of  the  title  from  productive  to  combative.  So  remote 
and  obscure,  indeed,  is  the  nature  of  the  origin  of  any  title  to 
land  that  any  effort  at  justifying  present  incomes  on  the  basis 
of  ancient  equities  is  not  worthy  of  serious  consideration. 

But  whatever  might  be  such  embryonic  equities  of  these  titles, 
the  growth  of  land-values  since  then  is  much  like  that  of  a 
picture,  for  instance,  which  the  original  painter  may  have  sold 


THE  WEAPONS   OF   COMMERCIAL   COMBAT  203 

• 

for  ten  dollars,  in  order  to  keep  his  pot  boiling,  but  which 
society  ultimately  appraises  at  ten  thousand — usually  after  the 
painter  is  dead.  Society  lauds  the  painter  as  a  great  artist, 
accrediting  him  with  contribution  to  the  highest  advance  of 
civilization.  But  it  proves  itself  far  from  civilized,  at  the  same 
time,  by  inconsistently  and  unjustly  allowing  the  $9990  which 
he  created  to  remain  the  lawful  property  of  the  various  art- 
dealers  who  had  happened  to  speculate  upon  the  value  of  the 
painting  since  its  creation. 

Society  forgets  that  its  delay,  or  stupidity,  or  grossness  of 
taste,  in  appraising  the  picture  can  never  affect  the  fact  that, 
whatever  may  prove  ultimately  to  be  its  value,  that  value  was 
created  by  the  painter.  Society  must  consider  itself  the  cus- 
todian of  that  value  until  it  is  paid.  It  owes  it  to  the  painter 
far  more  literally  than  it  owes  the  rent  on  its  art-museums. 
It  is  now  an  anarchist  in  fact,  in  its  brutal  lack  of  organized 
attitude  toward  the  painter,  far  more  than  if  it  refused  to  pay 
its  rent.  It  cannot  pose  as  the  patron  of  art  in  any  effective 
degree  until  it  first  guarantees  to  the  artist  the  recognized  value 
of  what  he  has  produced. 

Now  in  the  case  of  real  estate  it  is  society  which  is  the 
creator,  rather  than  any  individual.  In  allowing  private  titles 
to  land  to  continue,  while  society  is  daily  investing  its  labor 
and  brains  in  making  those  sites  more  valuable,  it  is  defrauding 
itself  as  foolishly  as  if  a  poor  painter  should  encourage  the 
speculation  in  art  which  robs  him  of  his  proper  pay.  The 
curators  of  both  our  artistic  creations  and  our  land-values  should 
be  non-owning,  salaried  public  agents,  reserving  in  each  case  the 
increment  of  all  ultimate  appraisals  to  the  original  creator — 
to  the  individual  in  the  case  of  the  painting,  and  to  society 
as  a  whole  in  the  case  of  the  land. 


CHAPTER  X 

INTEREST  AND  DIVIDENDS 

TURNING  now  to  that  particular  weapon  of  commercial 
combat  which  is  herein  to  be  known  as  interest,  but  which  in 
the  commercial  world  often  masquerades  under  the  name  of 
dividends,  we  encounter  an  institution  which  has  risen  to  such 
transcendent  importance  in  the  economic  history  of  America 
that  it  demands  at  least  a  special  chapter  of  its  own.  There 
is  no  other  topic  of  such  supreme  import  to  modern  society 
as  the  nature  of  interest.  There  is  no  other  one  feature  of 
the  social  organism  which  handles  anything  like  the  current 
volume  of  wealth  as  this,  nor  which  guides  toward  happiness 
or  unhappiness  so  many  lives. 

There  is  no  other  one  institution — excepting  possibly  the 
twin  brother  of  interest,  commercial  competition — which  forms 
such  a  menacing  sword  of  Damocles  as  this,  suspended  as  by 
a  hair  above  our  political  government  and  our  national  destiny. 
Therefore  no  treatise  on  political  economy  may  lay  claim  to 
authority  which  does  not  debate  at  the  outset  this  question  of 
the  nature  of  interest,  doing  so  incisively  as  to  the  interests 
of  society  as  a  whole.  No  public  question  can  be  approached 
intelligently  without  a  full  comprehension  of  its  essentials. 

No  theorizing  of  any  sort  is  competent  unless  it  recognizes 
interest  and  competition  as  together  forming  the  two  legs  upon 
which  stalks,  just  now,  our  entire  commercial  world-civilization 
to  its  fate.  No  apology  is  necessary,  therefore,  for  detaining 
the  -reader  with  a  careful  review  of  the  nature  of  interest,  before 
proceeding  further  with  the  historical  outline  of  America's 
economic  progress. 

Interest  versus  Dividends.  — For  the  present,  the  minor  differ- 
ences between  interest  on  bonds,  commercial  paper  or  personal 
loans,  as  contrasted  with  dividends  on  stock,  will  be  overlooked. 
The  same  remark  applies  to  some  so-called  profits,  which  include 
wrongly  sums  which  are  in  reality  interest.  Whatever  the 

204 


INTEREST   AND   DIVIDENDS  205 

name,  the  essential  character  of  interest  is  that  it  is  money 
paid  by  the  Ultimate  Consumer  (and  not  by  the  borrower) 
for  the  privilege  of  use  of  certain  artificial  appliances  of  indus- 
try, such  as  buildings,  tools,  railways,  stores  of  material,  etc., 
the  legal  ownership  of  which  is  vested  in  certain  individuals. 

These  payments  are  never,  as  things  go  now,  made  directly 
by  the  Ultimate  Consumer,  who  alone  pays  all  interest,  to  the 
owner  of  the  appliances.  The  appliances  are  used  by  manu- 
facturers or  middlemen  or  retailers  who  supply  the  Ultimate 
Consumer,  and  who  act  as  his  agent  in  paying  the  tax  called 
interest  to  the  owner.  This  tax  is  then  charged  up  to  the 
Consumer  in  the  retail-price  of  the  goods  produced,  and  col- 
lected from  him  across  the  retail  shop-counter. 

It  is  to  be  noted  that  in  every  such  case  the  owner  of  the 
appliances  not  only  makes  no  use  of  them  himself,  but  that 
he  has  no  interest  nor  pleasure  in  that  ownership,  except  that 
of  receiving  the  tax  called  interest  or  dividends.  He  invests  in- 
differently in  a  South  African  diamond-mine,  a  Cuban  cigar- 
factory  or  an  American  railway;  in  potatoes,  gasoline  or  cos- 
metics. With  him  there  is  not  the  slightest  pretense  of  any 
craftsman's  interest,  Consumer's  desire,  collector's  taste  nor 
any  other  human  passion  connected  with  the  tangible  property 
itself. 

None  is  expected.  The  sane  investor  asks  himself  only  two 
questions  concerning  any  proposed  investment: 

(1)  What  interest  will  it  pay? 

(2)  What  are  the  chances  for  getting  my  principal  back 
again  ? 

There  is  no  aspect  of  human  life  so  utterly  bloodless  as  that 
of  commercial  investment.  There  has  hardly  been  a  writer,  from 
Chaucer  to  Charles  Dickens,  who  felt  the  human  pulse  and 
whose  words  have  survived  for  that  reason,  who  did  not  despise 
commercialism  and  interest  from  the  bottom  of  his  heart. 

It  is  true  that  there  is  a  minority  of  investors,  such  as  officials 
of  corporations,  who  carry  investment  in  the  securities  of  their 
own  corporation,  in  whose  work  they  may  be  psychologically 
as  well  as  financially  interested.  But  this  is  merely  because 
such  securities  fall  better  within  their  judgment  as  to  worth 
than  do  strange  ones. 

It  is  in  just  such  cases,  indeed,  that  the  contrast  between 
the  psychological  interest  of  the  workman  loving  his  work,  and 


206  MODERN   ECONOMIC   TENDENCIES 

the  financial  interest  of  the  owner  earing  for  nothing  except 
revenue,  becomes  most  impressive,  when  both  are  embodied 
within  the  same  individual.  For  it  is  the  former  alone,  which 
receives  inadequate  reward  and  enjoys  virtually  no  outlet,  which 
is  of  value  to  society.  The  latter,  which  is  valueless  or  de- 
structive to  society,  is  the  only  one  amply  rewarded  by  society. 

Expansion  of  Facilities. — The  community  is  constantly  grow- 
ing in  population,  territory,  invention,  wealth,  intricacy  and 
standard  of  living.  All  of  these  sorts  of  expansion  are  con- 
tinually demanding  a  corresponding  extension  of  material  ap- 
pliances and  facilities  for  industry.  But  at  any  point  where 
the  need  for  such  further  extension  arises,  the  question  always 
arises  with  it:  How  can  the  Consumers  needing  the  extension 
secure  the  materials  and  labor  requisite  therefor  ? 

In  the  factory-system  the  answer  to  this  question  is  always 
simple.  All  that  is  needed  is  a  requisition  upon  the  stock-room. 

In  the  factory-system  the  maintenance  of  an  accumulation 
of  surplus  materials  is  always  a  department  as  important  as 
any  other.  These  materials  are  held  subject  to  requisition  by 
the  Central  Office  in  behalf  of  any  man  who,  as  that  Office 
decides,  should  use  the  materials  for  making  some  extension 
useful  to  the  factory-community.  So  soon  as  separate  owner- 
ship of  the  materials  is  eliminated  the  problem  resolves  itself 
into  beautiful  simplicity. 

But  modern  society  does  not  know  enough  to  maintain  its 
own  Stock  Room  and  Central  Office,  nor  to  eliminate  separate 
ownership-in-industry.  So,  when  the  Consumer  wishes  an  ex- 
tension of  facilities  he  is  told  to  apply  to  the  financier,  who 
will  loan  him  the  paper  equivalent  of  ownership  of  the  needed 
materials,  taxing  him  interest  until  the  loan  is  repaid.  As  in- 
cidental props  to  this  apparently  simple  plan  has  grown  up 
that  entire  fabric  of  promoters,  bankers,  brokers,  clerks,  ex- 
changes, etc.,  known  as  the  financial  system. 

All  this  is  inexcusably  cumbrous  and  expensive,  in  comparison 
with  the  simpler  one  of  the  factory-system,  which  makes  no 
paper  loan  and  charges  no  interest,  but  advances  the  materials 
upon  untaxed  credit.  Yet  this  simple  statement  of  the  financial 
method  just  given,  so  obviously  inferior  to  the  factory-system 
method  of  financing,  is  so  much  better  than  the  reality  in  the 
commercial  world  that  it  is  inadequate  as  more  than  a  starter 
on  our  investigation. 


INTEREST   AND   DIVIDENDS  207 

Initiative. — For  in  the  actual  world  the  Ultimate  Consumer, 
who  pays  all  the  bills  and  who  is  theoretically  supposed  to  take 
the  initiative  in  expressing  desire  for  that  for  which  he  is  to 
pay,  is  never  permitted  by  the  commercialists  to  enjoy  that 
prerogative,  of  being  the  first  to  ask  for  the  loan.  Instead,  it 
is  the  business  of  the  financier,  as  a  shrewd  businessman,  to 
foresee  the  need  of  the  Consumer  for  the  extension  in  question, 
and  then  to  corral  in  advance  the  means  for  its  gratification. 

The  man  who,  witnessing  a  shipwreck  off-shore,  should  pre- 
pare a  stock  of  coffee  and  sandwiches  against  the  drifting  in 
of  half-dead  survivors,  to  whom  they  were  to  be  sold  at  a  dollar 
a  plate,  would  be  actuated  by  motives  which,  in  their  economic 
aspect,  are  identical  with  those  of  the  shrewd  financier  who 
secures  a  franchise,  or  establishes  a  market,  for  facilities  which 
he  knows  the  community  will  soon  have  to  have  or  die  of 
congestion.  Morally  the  two  cases  are  different  only  because 
society  is  able  to  see  all  the  factors  in  the  case  of  the  ship- 
wreck, but  becomes  confused  by  the  intricacy  of  fact  in  the 
case  of  the  franchise,  charter  or  "vested  interest."  But  in 
social  effect  the  two  cases  are  peas  out  of  one  pod. 

The  pressure  upon  sheer  life  and  death  involved  in  the  need 
of  a  great,  congested  city  for  transit-facilities,  not  to  mention 
food,  shelter,  clothing  and  amusement — the  last  being  one  of 
the  real  necessaries  of  life — is  no  whit  less  tragic,  however 
less  obvious,  than  that  of  shipwrecked  seamen.  Yet  society, 
in  its  blind  loyalty  to  a  commercial  system  which  it  never  de- 
liberately adopted,  and  which  it  doesn't  know  why  it  owns, 
offers  its  richest  premiums  for  the  encouragement  of  just  this 
spirit  of  exploiting  the  shipwrecked.  And  it  cannot  stop  it 
until  it  prohibits  all  ownership-in-industry. 

It  is  admittedly  true  that  the  work  of  the  financier  or  pro- 
moter requires  foresight  and  energy.  So  does  that  of  the  life- 
saver  on  the  beach,  who  does  the  exact  opposite  from  exploiting 
the  shipwrecked.  But  so  also  does  piracy.  So  also  does  that 
of  the  discoverers  in  medical  and  surgical  science,  in  astronomy, 
physics  or  chemistry,  in  legislation  or  jurisprudence.  It  might 
even  be  suggested  that  so  also  does  that  of  the  truly  scientific 
sociologist. 

All  of  these  most  diverse  and  contrasted  occupations  require 
foresight,  energy,  skill,  industry  and  force  of  character.  But 
the  energy  or  the  like  going  into  an  enterprise  is  no  measure 


208  MODERN   ECONOMIC   TENDENCIES 

at  all  of  its  value  to  society.  It  is  what  comes  out  which  de- 
termines that. 

Yet  none  of  these  later  vocations  in  the  list  do  v/e  reward 
with  huge,  unaccounted  ownerships,  fluctuating  hourly  in  Wall 
Street,  exacting  tribute  from  the  Ultimate  Consumers  for  life, 
and  then  inheritable  for  generation  after  generation.  We  do 
not  need  to  do  so.  No  department  of  life  is  making  more 
rapid  progress,  or  maintains  its  routine  more  efficiently,  than 
these  wholesome  vocations  paid  only  by  salary  or  wages — and 
often  by  not  much  of  that.  Commercialism,  which  alone  is 
making  greater  apparent  progress,  is  growing  more  rapidly 
only  in  an  undesirable  aspect.  Even  life-saving  on  the  beach 
was  never  done  efficiently  until  it  was  removed  from  the  field 
of  chance  adventure  for  indeterminate  profit,  and  was  placed 
upon  a  salaried  basis — entrusted  no  longer  either  to  the  unre- 
liable impulses  of  altruism  or  to  the  back-acting  inducements 
of  commercialism,  but  organized  simply  as  one  department  of 
our  vast  national  factory-system. 

Tradition. — Let  us  face  this  issue  honestly.  In  the  contrast 
between  commercial  and  scientific  rewards  we  are  dealing  with 
no  basic,  unalterable  distinction  whatever.  All  is  arbitrary 
tradition.  We  might  just  as  easily  reward  our  promoters  with 
salaries  and  our  scientists  with  dividends,  if  we  chose.  The 
only  difference  would  be  that  then  we  should  lose  a  lot  of  our 
present  commercial  "initiative/'  without  which  we  should  be 
far  better  off,  and  a  lot  of  science  without  which  we  should  be 
far  worse  off. 

All  through  the  industrial  world  the  situation  is  the  same 
in  essential,  however  differing  in  detail.  The  investments  of 
the  capitalists  everywhere  reveal  themselves,  upon  examination, 
as  mere  forestallings  of  the  public  need,  made  deliberately  as 
a  hold-up  and  sanctioned  only  by  custom.  These  investments 
are  never  requested  by  the  public,  but  always  by  the  investor. 

The  truth  of  this  does  not  depend  upon  the  size  of  the 
enterprise.  When  a  new  grocery-store  is  to  be  installed,  for 
instance,  those  who  are  to  support  it  financially,  the  Ultimate 
Consumers,  are  never  consulted  first,  any  more  than  when  it  is 
a  railway  or  an  oil-refinery  which  is  involved. 

The  active,  expensive  scramble  for  railway  and  other 
franchises,  in  the  earlier  days  when  there  were  still  franchises 
to  be  given  away,  stands  in  parallel  with  the  present  clamor 


INTEREST   AND    DIVIDENDS  209 

in  Wall  Street  and  before  our  public  commissions  for  continual 
expansion  of  the  opportunities  for  investment  in  industrial 
enterprises,  in  the  refunding  of  railway  or  other  securities, 
or  what  not.  In  the  general  country,  outside  of  the  financial 
centers,  the  constant  multiplication  of  small  shops,  new  cor- 
porations, expanding  valuations  of  dwellings,  etc.,  performs  the 
same  function — more  diffused  in  form,  but  greater  in  aggregate 
volume. 

There  is  not  a  fact  sticking  out  of  the  whole  financial  field 
which  warrants  the  idea  that  investment  is  regarded  by 
financiers  as  a  burden.  There  is  none  so  prominent  as  the  fact 
that  investment  is  everywhere  regarded  as  an  opportunity, 
everywhere  eagerly — even  frantically — sought. 

Commercial  Propaganda. — The  doctrine  common  in  the  care- 
less philosophy  of  the  street,  and  found  even  in  the  responsible 
lecture-halls  of  our  universities,  that  he  who  pays  interest  ever 
begs  the  investor  to  invest,  is -one  impossible  of  momentary 
defense.  This  doctrine  prevails  only  because  it  is  to  the  interest 
of  the  commercial  world  not  to  have  it  attacked.  Their  instilla- 
tion of  such  doctrine  into  the  people,  through  every  channel 
influenced  by  wealth,  is  just  as  insincere  in  its  origin — or  as 
unhappy  in  its  self-delusion,  if  you  prefer — and  in  either  case 
as  deplorable  in  its  effect — as  is  that  taught  the  German  people 
by  the  Prussian  military  oligarchy. 

The  capitalist,  it  is  true,  is  constantly  under  importunity 
from  the  borrower  or  promoter  to  invest;  but  this  is  only  because 
it  is  not  the  borrower  nor  the  promoter  who  pays  the  interest. 
It  is  the  Ultimate  Consumer  alone,  for  whom  neither  the 
borrower  nor  the  promoter  is  acting  as  an  authorized  agent, 
who  pays.  Never  would  the  borrower  borrow,  nor  the  pro- 
moter promote,  if  he  did  not  expect  the  Ultimate  Consumer  to 
more  than  reimburse  him  for  his  interest-payments.  Everyone 
possessing  the  leisure  and  education  of  a  capitalist  knows  this. 

Risk  in  Commercialism. — As  to  the  speculative  risk  assumed 
by  the  investor  or  promoter,  in  thus  anticipating  the  needs 
of  the  community,  that  belongs  in  the  same  class  with  the  risk 
incurred  by  the  speculator  in  art,  or  anything  else,  or  the  in- 
vestor in  a  ship  to  be  used  for  privateering  or  piracy.  No  sane 
nor  really  civilized  community  would  ever  permit  any  individual 
to  assume  that  risk.  The  risk  taken  by  the  commercialist  is 
exactly  that,  for  instance,  of  the  privateer  in  national  defense 


210  MODERN   ECONOMIC   TENDENCIES 

against  a  foreign  foe — picturesque,  extremely  profitable  (upon 
the  average)  to  the  privateer,  and  supposedly  patriotic;  but 
actually  harmful  and  dangerous  to  society,  and  therefore  dis- 
loyal in  effect. 

When  governments  were  so  poorly  organized  that  adequate 
navies  were  unknown,  privateering  was  permitted  as  a  neces- 
sity. In  those  days  the  ships  of  Drake  and  Hawkins,  which 
have  handed  down  to  us  our  highest  ideals  of  sailor-manhood, 
fought  just  as  bravely,  and  perhaps  more  efficiently,  than  those 
of  the  royal  navy  of  that  day.  But  this  was  not  because 
privateering  is  inherently  more  efficient  than  a  navy,  but  be- 
cause then  the  navy  was  an  undeveloped,  unappreciated  and 
neglected  institution,  the  possibilities  of  which  were  quite  mis- 
understood. 

So  long  as  privateering  was  allowed  at  all,  its  glittering 
allurements  were  sure  to  deceive  thus  the  public  mind.  But 
we  are  now  far  enough  away  from  the  blinding  glare  of  such 
profits  to  realize  that  the  navy  was  then  poor  not  because  it 
was  royal,  but  because  the  stupidity  of  that  day  quite  failed 
to  comprehend  the  possibilities  of  a  navy  so  well  developed  that 
no  privateer  could  dream  of  rivaling  it.  For  Drake  and 
Hawkins,  with  their  tubby  little  sailing-ships,  represented  al- 
most the  highest  possibilities  of  privateering,  while  the  furthest 
fruits  of  the  governmental  organization  of  our  defense  by  sea 
we  have  not  yet  attained  in  our  most  magnificent  battleships. 

To  modern  notions  of  social  development  and  national  sta- 
bility, privateering,  when  not  sheer  piracy,  was  so  impotent 
a  reliance  in  the  face  of  attack  as  to  constitute  treason  in  effect. 
The  "Invincible"  Spanish  Armada,  of  the  sixteenth  century, 
threatened  not  only  England's  freedom  to  trade  upon  the  high 
seas,  but  also  the  sole  nucleus  of  political  liberty  then  remain- 
ing upon  the  soil  of  Europe,  in  the  English  system  of  that  day. 
The  imbecility  of  government,  such  as  that  of  Queen  Elizabeth, 
which  allowed  it  to  enter  the  English  Channel  unhindered  by 
any  organized  preparedness  in  London,  and  opposed  only  by 
the  gallant  privateers  of  various  small  channel-ports,  is  to-day 
inconceivable.  It  certainly  amounted  to  treason  to  civilization. 

We  now  deem  such  imbecility  characteristic  of  an  age  far 
more  crude  and  stupid  than  our  own  shrewd  times.  Yet  in 
our  present  stress  of  internal  economic  affairs  we  insist  upon 
an  exactly  parallel  reliance  upon  privateering  for  profit,  as 


INTEREST   AND   DIVIDENDS  211 

our  sole  defense  against  the  menace  of  impending  famine  and 
high  prices — that  menace  which  history  has  proven,  time  and 
again,  to  be  far  more  portentous  of  national  disaster  and 
unspeakable  human  misery  than  has  been  any  external  attack 
by  foreign  foe. 

The  crisis  which  resulted  from  this  policy  in  1588,  when 
Elizabeth's  throne  trembled  for  days  in  hazardous  balance,  may 
make  picturesque  reading  for  future  generations.  But  we  who 
thrill  so  pleasantly  over  the  spectacle  of  risk,  heroism,  noise 
and  color  now  recognize  the  situation  too  plainly  as  a  crazy 
hell  of  disorganization,  irresponsibility  and  inefficiency  to  call 
it  a  real  civilization.  We  now  see  plainly  that  the  privateers 
should  never  for  a  moment  have  been  permitted  to  assume 
the  risk — not  the  risk  to  themselves,  ~but  that  to  the  nation 
and  to  civilization.  Would  to  heaven  that  we  had  the  same 
clarity  of  vision  concerning  our  modern  commercial  privateers ! 

Initiative  and  Expansion  in  the  Factory-system. — For  the 
natural  answer  to  all  this  modern  anarchy  of  commercial 
investment,  as  our  reliance  for  securing  extensions  of  facilities 
— with  its  grave  danger  that,  under  it,  we  may  not  even  be  able 
to  maintain  our  present  rate  of  production — is  nothing  more 
radical  nor  fanciful  than  the  mere  extension  of  the  well  tried 
factory-system,  which  has  so  long  comprised  over  nine-tenths  of 
the  population,  to  include  all  the  rest.  Every  factory  main- 
tains a  stock  of  surplus  material.  If  the  factory-system  were 
co-extensive  with  the  nation  this  stock  would  include  all  food, 
clothing  and  every  conceivable  line  of  factory-product,  from 
stove-bolts  to  beans,  and  all  would  be  publicly  available  for  the 
making  of  extensions. 

All  would  be  available  without  asking  favor  of  a  single 
capitalist,  nor  incurring  a  dollar  of  liability  for  future  interest- 
payments.  Whatever  risk  of  loss  might  be  involved  in  building 
extensions,  the  value  of  which  only  the  future  could  reveal,  it 
would  fall,  like  the  gains,  upon  the  community  as  a  whole. 

More  than  that,  the  whole  of  this  loss  would  "be  visible  when 
the  supplies  were  requisitioned.  No  future  failure  could  add 
to  them.  No  commercial  margins  would  have  to  be  added. 
No  unpaid  loans  could  arise  in  the  future,  demanding  repay- 
ment out  of  other  enterprises.  No  unpaid,  unpayable  debts 
would  be  handed  down  to  posterity.  There  might  be  disap- 
pointment, but.  there  never  could  be  unexpected  loss. 


212  MODERN   ECONOMIC   TENDENCIES 

Do  you  reply:  "Such  public  opportunity  would  develop 
gigantic  graft"?  Kemember,  then,  that  that  is  exactly  what 
they  said  in  Elizabeth's  day  concerning  a  royal  navy — and  for 
the  same  reason. 

For  then  they  did  not  need  to  predict  graft.  It  was  already 
there,  upon  a  scale  to  shame  modern  pikers!  The  navy  was 
horribly  corrupt. 

But  that  fact  had  no  bearing  whatever  upon  any  comparison 
between  the  navy,  as  a  system,  and  privateering.  We  see 'now 
that  it  had  none  then.  It  has  none  to-day. 

Then  the  navy  was  corrupt  because  of  the  privateering.  When 
privateers  were  permitted  to  make  habitually  such  huge  for- 
tunes, no  one  could  afford  to  be  a  seaman  without  making  money 
out  of  his  calling.  Although  it  took  time  to  free  the  navy  of 
corruption,  the  abolition  of  privateering  was  a  necessary  first 
step,  not  a  final  result. 

This  fact  the  English  chose  to  learn,  in  their  dogged  English 
way,  through  generations  of  hideously  cruel  history.  We 
Americans  pride  ourselves  upon  being  more  facile  in  learning, 
without  waiting  for  hard  experience  of  our  own  to  teach  us. 

Actual  Extensions  of  Facilities. — For  it  must  be  remembered, 
as  to  the  modern  economic  problem,  that  all  extensions  of 
facilities  are  now  actually  made  in  the  face  of  two  unalterable 
facts.  These  are  that  ( 1 )  The  extensions  are  achieved,  even  now, 
under  commercialism,  not  by  any  drafts  against  the  future, 
so  far  as  materials  are  concerned,  but  only  by  drafts  upon  our 
actual,  existing  accumulations  of  factory -surplus  of  material, 
wherever  they  may  be  or  whoever  may  own  them.  No  con- 
ceivable system  of  finance  or  credit  can  (immediately  and  of 
itself)  possibly  expand  these  material  resources  by  a  single  brick 
or  bolt — although  a  faulty  system  may  tie  up  and  render  useless 
many  a  brick  and  bolt  already  there.  Our  problem,  whenever 
we  may  need  an  extension,  is  always  merely  to  find  access  to  the 
material  now  lying  ready. 

(2)  The  second  fact  is  that,  whenever  these  same  accumula- 
tions of  material  are  wanted  for  an  extension  of  the  facilities 
of  the  same  factory  which  produced  them,  no  loan  is  executed, 
no  securities  are  issued  and  no  interest-tax  is  collected.  All 
that  is  needed  is  a  non-interest-bearing  factory-requisition. 

Or,  if  it  be  true  that  the  former  cumbrous  procedure  is 
occasionally  followed,  it  is  not  for  the  sake  of  procuring  the 


INTEREST   AND   DIVIDENDS  213 

materials,  but  for  the  privilege  of  collecting  from  the  Ultimate 
Consumer  the  interest  upon  the  indebtedness  thus  artificially 
created.1  But  normally  no  interest  is  ever  charged  by  any  de- 
partment or  stock-room  of  any  factory  for  the  loan  of  supplies 
or  services  needed  by  some  other  department. 

The  reason  for  this  is  simple.  Any  such  a  charge  would 
come  back  immediately  upon  the  factory  as  a  whole,  because 
it  is  a  unit-organization  of  ownership.  Any  such  charge 
would  be  absurd  and  useless.  Whenever  dividends  or  interest 
are  collected  it  must,  in  order  to  have  any  point  at  all,  be  done 
across  a  gap  in  ownership.  Dividends  or  interest  are  merely 
evidence  of  discontinuity  of  ownership,  permitted  unwisely  in 
the  face  of  a  continuity  of  need.  They  are  no  evidence  at  all 
of  service  rendered. 

Capital  versus  Capitalism. — This  stock-room  accumulation  of 
materials  and  spare  service  which  forms  a  part  of  every  factory, 
and  which  in  aggregate  constitutes  society's  sole  resource  for 
material  growth,  is  purely  capital.  It  is  the  only  thing  which 
is  capital.  It  is  the  only  thing  needed  by  any  manufacturing 
community  for  the  extension  of  its  facilities  in  any  direction 
whatever. 

Yet  before  this  accumulation  may  become  available  for  use 
there  must  be  issued  from  the  Central  Office  certain  paper 
orders,  called  requisitions.  These  requisitions  constitute  the 
prototype,  in  the  pure  factory-system,  of  all  that  variety  of 
papers  which  are  called  in  the  commercial  world  "interest- 
bearing  securities/'  "commercial  paper,"  etc.  They  constitute 
the  circulating-medium  of  the  factory-system.  They  are  the 
only  natural  credit-instruments — and  before  this  book  is  finished 
the  instruments  for  the  transmission  of  fluid  credit  will  be 
seen  to  be  the  most  important  and  vital  of  all  factors  for 
social  metabolism  and  stability. 

All  such  paper  requisitions,  if  they  draw  no  interest,  as  in 
the  actual  factory,  are  mere  representations  of  real  capital  for 
convenience  of  record.  They  themselves  are  worthless  in  nego- 
tiation. Their  proper  function — fluidity  of  transmission  of 
credit — they  perform  perfectly.  But  that  is  all.  They  possess 
no  inherent  tendency  to  expand.  They  do  not  dominate  nor 
perturb  life  in  any  way.  They  merely  aid  it. 

But  if  these  scraps  of  paper  draw  interest,  as  is  always  true 

1  Note  the  case  of  the  Kansas  City  Union  Depot,  cited  on  page  279. 


214  MODERN   ECONOMIC   TENDENCIES 

in  the  commercial  world,  then  they  become  a  very  different 
matter  indeed.  Because  they  carry  with  them  the  special 
privilege  of  exacting  the  tribute  called  interest,  they  nov/  be- 
come actively  negotiable.  For  the  same  reason  they  possess  an 
irresistible  tendency  to  expand  in  volume. 

For  these  reasons  they  now  exercise  an  important — a  dominant 
— influence  upon  the  fluidity  of  our  credit,  the  purchasing- 
power  of  our  money,  our  hiring-power  for  labor,  and  many  other 
things.  Therefore  they  deserve  a  name  to  themselves. 

They  have  ceased  merely  to  represent  capital,  as  was  the 
pure  function  of  the  factory-requisitions.  They  were  never 
capital  itself.  Yet  they  have  become  our  main  reliance  as  a 
circulating-medium. 

Therefore  they  are  now  called  capitalism.  But  capitalism, 
it  must  never  be  forgotten,  is  an  institution  distinct  from  and 
contrasted  with  true  capital  in  every  conceivable  way. 

In  our  actual  factory-system,  as  now  directed  by  our  ablest 
businessmen,  these  paper  requisitions  upon  the  nation's  surplus 
stock  of  material  and  service  never  draw  interest.  This  is 
because  the  sole  object  of  their  issue,  under  that  system,  is 
interchange  and  increase  in  production. 

But  in  the  commercial  world  these  papers  always  draw  in- 
terest. This  is  because  virtually  the  sole  reason  for  their  issue, 
under  that  system,  is  the  extraction  of  interest  from  the 
Ultimate  Consumer. 

It  is  true  that  ostensibly  the  issue  of  commercial  paper  is 
for  the  purpose  of  facilitating  productive  effort.  To  some  slight 
degree,  and  so  far  as  the  real  commercial  purpose  of  the  paper — 
interest — is  not  interfered  with,  they  do  facilitate  productive 
activity. 

But  the  latter  function  is  quite  secondary  to  the  former. 
Anyone  who  doubts  it  needs  only  to  note  that  securities  which 
fail  to  draw  interest  cannot  be  issued — or  cannot  stay  issued. 
It  is  one  of  the  heaviest  indictments  against  the  commercial 
system  that  this  is  so — that  no  enterprise  may  possibly  be 
launched  or  continued,  to-day,  unless  it  is  capable,  in  addition 
to  paying  all  natural  expenses  and  serving  the  community,  of 
paying  a  substantial  return  upon  its  securities  in  interest  or 
dividends. 

This  situation  has  been  explained  at  length  in  order  to  an- 
ticipate and  negative  the  argument,  so  common  on  the  street 


INTEREST  AND   DIVIDENDS  215 

and  in  university-economics,  that  capitalism  and  interest  are 
essential  prerequisites  to  the  expansion  of  facilities.  This, 
indeed,  his  nothing  to  do  with  the  matter,  except  as  a  plausible 
excuse  for  the  enjoyment  of  unearned  income.  Not  only  do 
the  capitalists  themselves  systematically  ignore,  in  their  rela- 
tions with  the  public,  that  system  for  extending  facilities 
(without  the  burden  of  interest-payments)  which  they  them- 
selves enforce  within  every  factory  which  they  control,  but 
they  expend  money  and  effort  freely  in  resisting  strenuously 
every  effort  of  the  public  to  have  the  non-interest-burdened 
factory-system  adopted,  in  substitution  for  the  interest-laden 
commercial  one. 

Theories  of  Interest. — When  one  seeks  an  explanation  of  the 
nature  of  interest  in  the  economic  text-books  one  is  always  re- 
ferred back  to  the  original  history  of  the  investment.  In  this 
policy  we  concur — only  that  we  shall  try  to  get  our  history  true 
to  fact. 

In  this  reduction  to  origin  all  the  current  theories  of  interest 
(and  there  are  several,  none  of  them  accepted  as  authoritative) 
may  be  reduced  to  two  classes.  One  of  these,  which  we  shall 
call  the  Walker  theory,  although  not  confining  ourselves  to  the 
language  of  Walker,  is  based  upon  the  nature  of  the  effort 
which  produced  the  accumulation.  The  other,  which  may  be 
called  the  Fisher  theory,  is  based  upon  the  time-factor  involved 
in  the  method  of  use  of  the  capitalism. 

Both  theories  start  with  the  idea  that  capitalism  begins  in  a 
surplus  productive  power  on  the  part  of  a  true  producer,  over 
his  current  needs  for  life-support ;  which  surplus  power,  coupled 
with  frugality,  enables  the  skilled,  industrious  and  thrifty  pro- 
ducer to  accumulate  a  material  surplus.  This  surplus  he  loans 
to  the  unthrifty  producer,  who  can  better  afford  to  pay  him 
interest  than  to  forego  the  use  of  the  capital. 

Both  theories,  too,  are  content  to  argue  the  equity  of  interest 
from  the  standpoint  of  borrower  and  lender  alone.  They  quite 
overlook  the  vital  concern  which  society,  as  a  whole,  must  have 
in  any  contract  between  these  two.  Yet  society  is  a  third 
contracting-party  in  questions  of  investment,  just  as  vitally 
interested  as  it  is  in  contracts  involving  slavery,  or  as  it  is 
in  the  marriage-contract.  The  people  who  urge  that  borrowers 
and  lenders  have  a  right  to  do  just  as  they  please  are  placing 
themselves,  however  unconsciously,  in  exactly  the  same  mental 


216  MODERN   ECONOMIC   TENDENCIES 

and  moral  category  with  those  who  argue  excuse  for  slavery, 
or  prostitution,  or  unrecompensed  free  love,  as  things  in  which 
only  the  principals  are  concerned. 

The  various  theories  of  interest  we  shall  examine  first  in 
their  unofficial  form,  in  which  they  float  about  the  world  of 
economic  discussion.  Later  they  will  be  chased  down  to  the 
details  of  official  language. 

Interest  Warranted  by  Original  Act. — First  comes  the  con- 
tention that  the  interest  drawn  by  the  capitalist  is  a  right  based 
upon  his  original  industry  and  frugality,  whereby  wages  were 
saved  and  accumulated  until  they  gave  him  power  over  his 
fellowmen. 

But  for  each  day's  work  done,  or  each  job  finished,  in  this 
original  industry  the  embryo  capitalist  was  paid  in  full,  with 
wages  which,  however  he  may  quarrel  with  them  from  the 
workman's  point  of  view,  he  can  never,  as  a  capitalist,  say 
were  insufficient  or  inequitable.  Therefore  there  is  no  basis 
whatever  for  any  argument  that,  to  reward  thrift,  their  pur- 
chasing-power must  in  equity  be  eked  out  with  interest- 
payments. 

Even  from  the  viewpoint  of  the  workman,  if  the  wages  were 
then  regarded  as  insufficient,  there  was  no  contention  on  either 
side  that  the  deficit  would  or  should  be  made  up  later  in  the 
form  of  interest.  They  should  have  been  made  up  in  the  form 
of  wages,  paid  then  instead  of  later. 

Yet,  if  it  be  true  that  the  workman  was  fully  paid  in  the 
first  place,  then  no  later  demand  for  any  further  payment 
whatever,  whether  called  interest  or  by  any  other  name,  can 
be  based  upon  the  origin  of  the  wealth.  Whatever  may  be  the 
equity  urged  in  support  of  the  capitalist's  receipt  of  interest, 
it  must  be  based  upon  some  act  of  his,  truly  in  the  interest  of 
society,  performed  at  a  date  subsequent  to  the  acquisition  of 
the  wealth  invested. 

As  a  matter  of  fact,  this  position  is  upheld  by  every  fact  con- 
cerning the  commercial  world;  for  the  vast  majority  of  all 
personal  wealth  now  drawing  interest,  came  into  its  owner's 
hands  long  since  he  ever  performed  any  wage-earning  labor. 

The  fact  is  that  every  capitalist  to-day,  so  far  as  he  has  any 
consistent  economic  views  whatever,  holds  that  the  wages 
actually  paid  for  the  original  work  did  fully  imburse  the  work- 
man with  the  value  of  what  he  had  produced.  To  take  any 


INTEREST   AND   DIVIDENDS  217 

other  position  would  involve  the  capitalists  of  to-day  in  a  pretty 
lien  against  their  properties,  from  the  claims  of  past  labor  for 
deficits  in  proper  wages — or  for  wages  saved  and  lost  in  the 
attempt  to  make  good  the  deficit  by  investment  in  the  capital- 
istic system !  Not  all  the  title-guarantee  companies  in  America 
could  make  valid  the  title  to  any  piece  of  commercial  property 
against  such  a  gigantic  lien  as  that!  If  sustained,  it  would 
throw  all  the  huge  incomes  of  modern  commercialism  to  the 
heirs  of  past  workingmen,  most  of  whom  are  still  workingmen. 
The  cogent  points  are  that,  however  inequitable  may  have 
been  the  original  wage,  (a)  it  is  not  the  slightest  aid  to  justice 
to  suggest  present  interest  as  a  salve  for  past  deficit  in  wages, 
because  the  workingman  always  loses  at  the  interest-game.  He 
remains  a  workingman  chiefly  because  he  does  not  know  how  to 
play  it. 

(b)  There  is  not  the  slightest  evidence  that  the  present  in- 
stitution of   interest  or   dividends   guides   its   payments   even 
approximately  toward  those  who  suffered  from  any  insufficiency 
of  original  wage. 

(c)  The  task  of  identifying  those  who  thus  suffered  in  the 
past,  that  they  may  be  reimbursed  now  in  the  form  of  in- 
terest-payments, is  the  most  hopelessly  impossible  which  the 
mind  can  conceive.    If  interest  be  really  based  upon  the  origin 
of  wealth,  then  it  is  the  most  inequitable  institution  in  the 
world,  for  it  has  wholly  failed  to  keep  record  of  those  whom  it 
owes. 

(d)  There  is  not  the  slightest  evidence  that  those  who  enjoy 
interest  in  quantity  to-day  were  ever  either  markedly  indus- 
trious (productively)  or  markedly  saving  in  the  past.  Perhaps 
a  few  were  so,  but  as  a  class  the  recipients  of  interest  are  not 
emphasized  in  that  direction. 

(e)  Present  incomes  in  the  form  of  interest,  and  present 
valuations  of  principal,  are  far  too  large  to  be  explained  by 
any  connection  with  original  savings  from  wages.     If  thrift 
in  saving  from  wages  had  ever  been  the  sole  origin  of  interest- 
bearing  wealth,  we  should  never  have  had  any  modern  social 
problem. 

For,  following  Professor  Hayes,  it  may  be  pointed  out  that 
the  one  obvious  feature  of  magnitude  of  modern  incomes  upon 
capital  throws  into  absurdity  most  of  the  academic  theories  as 
to  their  equity  or  nature  or  origin.  Thus,  we  are  reputed  to 


218  MODERN  ECONOMIC  TENDENCIES 

possess  at  least  one  billionaire  citizen.  Millionaires  are  now 
so  common  as  to  be  no  longer  worthy  of  notice.  Yet  what  is 
involved  in  saving  such  fortunes  from  wages,  or  in  exerting 
any  degree  of  productivity  and  frugality  such  that  its  value 
to  society  should  justify  such  fortunes? 

A  man  who  actually  earned,  productively,  $20,000  a  year, 
and  saved  half  of  it,  would  certainly  be  a  remarkable  man. 
Yet  in  order  to  become  a  mere  millionaire  by  that  process 
would  require  a  century  of  continuous  effort!  To  accumulate 
a  billion  would  require  a  thousand  centuries! 

Yet  the  whole  history  of  modern  American  commercialism 
is  compassed  within  a  century.  The  bulk  of  all  our  millionaires 
have  been  created  within  the  last  twenty  years  or  so.  Pre- 
liminary data  go  to  show  that  a  third  of  them  have  come  into 
existence  within  the  last  year  or  so! 

For  all  these  reasons  any  explanation  of  interest  by  reference 
to  origin  has  become  too  great  an  absurdity  for  presentation  to 
self-respecting  intelligent  people.  Whatever  the  capitalist  may 
have  done  to  deserve  interest,  he  must  have  done  it  since  he 
acquired  the  wealth  invested. 

Interest  as  a  Motive  Promoting  Thrift. — Next  comes  the 
argument  that  if  interest  were  not  paid  upon  savings,  no  sav- 
ings against  old  age  would  be  made. 

It  does  seem  as  if  this  doctrine  did  not  need  serious  refuta- 
tion, yet  it  does.  It  is  met  most  frequently  in  the  mouths  of 
intelligent  businessmen.  Certainly,  if  it  should  become  no 
longer  possible  to  provide  against  old  age  by  savings  plus  in- 
terest, there  would  be  all  the  more  anxiety  to  provide  enough 
savings  to  do  it  by  the  principal  alone. 

But  more  than  that,  if  interest  is  to  be  accredited  only  by 
its  excellence  of  provision  against  old  age,  then  certainly,  as 
a  mere  matter  of  policy,  it  defeats  itself.  For  if  there  be  any 
one  particular  in  which  the  commercial  system  fails  society  in 
a  way  more  obvious  and  tragic  than  elsewhere,  it  is  in  its  utter 
failure  to  provide  adequately  against  old  age,  in  the  great 
majority  of  industrious,  frugal  lives !  The  prime  characteristic 
of  the  modern  commercial  system,  made  up  as  it  is  of  the 
policies  of  the  jousting-lists,  Donnybrook  Fair,  the  privateers 
and  simon-pure  piracy,  all  developed  by  modern  technique  to 
a  degree  shaming  any  one  of  those  good  old  sports,  is  that  it 


INTEREST  AND  DIVIDENDS  219 

makes  uncertain  the  title  and  tenure  of  every  piece  of  property 
in  the  land. 

The  prime  tragedy  of  life  among  the  lowly,  prevailing  an 
hundred  times  to  once  where  poverty  in  old  age  is  the  fruit 
of  individual  irresponsibility,  is  the  familiar  one  of  the  family 
or  person  who  has  lived  an  unsullied  life  of  toil,  thrift  and 
saving,  only  to  find  in  the  end  that  either  no  progress  can  be 
made  against  rising  prices  and  the  accidents  of  life,  by  saving; 
or  else,  having  saved,  to  see  the  whole  swept  away  by  our 
commercial  anarchy,  just  as  old  age  needs  it  most;  or  else, 
barring  both  of  these,  to  find  prices  rising  against  one  more 
rapidly  than  savings  can  be  accumulated,  even  with  interest  to 
help. 

Because  the  commercial  system  is  not  only  a  total  failure 
in  its  methods  of  provision  against  old  age,  for  all  except  a 
few,  but  is  actually  an  obstacle  to  such  provision,  this  country 
should  long  ago  have  adopted  that  general  policy  of  insurance 
against  old  age  by  the  government  which  prevails  in  most  other 
progressive  countries.  It  is  just  because  we  are  more  com- 
mercial, and  therefore  more  inconsiderate  of  the  money  of  the 
weak  and  the  old,  than  any  other  land,  that  we  should  have 
done  this  first,  rather  than  last. 

Our  recent  provision  of  a  "postal"  savings-bank  is  a  late 
step  in  the  right  direction;  but  it  does  not  go  far  enough.  It 
still  offers  interest  as  an  inducement  to  save.  It  still  leaves 
untouched  the  huge  interest-bearing  "savings"  of  others,  to 
raise  prices  against  the  poor. 

Whenever  a  true  science  of  political  economy  may  become 
accessible  to  the  people,  no  one  will  ever  expect  to  receive  in 
the  future,  in  return  for  present  savings,  more  than  one  hundred 
cents  on  the  dollar.  For  all  will  then  realize  clearly  that 
to  ask  any  increase,  as  in  the  form  of  interest,  must  take  more 
out  of  one's  credits,  in  the  form  of  higher  prices  collected  across 
the  shop-counter,  than  can  be  received  as  interest. 

For,  on  the  average,  this  increase  in  retail  prices  is  always 
equal  to  the  steadily  rising  volume  of  interest  paid  by  the 
nation  of  Ultimate  Consumers,  plus  a  commercial  margin  to 
cover  the  cost  of  paying  this  interest  to  the  Consumer,  and  then 
collecting  it  from  him  again  across  the  shop-counter.  Interest 
creates  poverty,  in  the  form  of  rising  cost  of  living,  rather  than 
prevents  it. 


220  MODERN  ECONOMIC  TENDENCIES 

For  all  these  reasons  any  reliance  upon  interest  as  an  induce- 
ment to  saving  against  old  age  is  the  most  mistaken  of  all 
policies.  It  is  as  mistaken  as  the  reliance  upon  advertising 
as  an  inducement  to  purchase.  Just  as  one  may  rely  best  upon 
the  natural,  wholesome,  unstimulated,  unperturbed  desire  of  the 
Ultimate  Consumer  to  lead  him  to  purchase  life-support  when 
he  needs  it,  to  the  maximum  volume  pecuniarily  possible,  so 
may  reliance  best  be  placed  upon  the  natural  instinct  to  provide 
against  old  age. 

For  in  each  case  the  instinct  is  a  basic  one — a  motive  force 
bedded  deep  in  the  springs  of  life,  rather  than  a  superficial 
result  needed  to  be  created  artificially.  All  that  society  needs 
is  a  rational  means  for  carrying  it  out.  All  which  any  really 
honest  person  should  want  is  the  certainty  of  possessing  in  the 
future  the  dollar  which  is  not  spent  now.  To  attempt  more 
is  to  cheat  oneself. 

This  instinct  to  provide  for  future  life  characterizes  all  lower 
forms  of  life,  as  well  as  directs  all  human  history.  It  drives 
the  insect-world  to  its  heroic  strivings  to  store  honey,  to  weave 
cocoons  or  to  lay  eggs — the  last-named  task  usually  ending  with 
the  death  of  the  parent.  It  guides  the  vegetable-world  to  ac- 
cumulate nutriment  in  seed  or  bulb  or  tuber.  It  leads  the 
animals  to  starve  and  freeze  themselves  that  their  young  may 
have  a  fair  start  in  life.  It  lies  back  of  every  school,  orphan- 
asylum  and  savings-bank.  But  all  these  latter  would  be  far 
more  effective  than  now,  if  only  they  were  not  throttled  at  every 
turn  by  the  parasitical  presence  of  commercialism  and  interest. 

Income  and  Outgo  of  Interest.— Let  us  revert  to  the  illus- 
tration of  the  family  enjoying  a  modest  income  of  both  wages 
(or  salary)  and  interest — this  time  in  figures.  Take  for  in- 
stance  the  family  normally  spending  twelve  hundred  dollars 
annually.  In  its  every  act  of  purchase  of  food,  clothing,  shelter, 
amusement  or  transportation  it  is  constantly  making  interest- 
payments.  These,  with  the  incidental  contributive  costs  due  to 
commercialism,  amount,  if  it  spends  all  its  income,  to  anywhere 
from  four  to  seven  hundred  dollars  annually.* 

But  this  is  the  usual  interest  upon  a  passive  investment  of 

about  ten  thousand  dollars !    Therefore  no  -family  of  this  grade 

is  a  winner  from  the  institution  of  interest,  even  in  the  direct 

pecuniary  sense,  unless  it  owns  interest-bearing  securities  aggre- 

*  For  more  accurate  figures  as  to  this,  see  page  336. 


INTEREST  AND   DIVIDENDS  221 

gating  well  above  ten  thousand  dollars  in  market-valuation,  the 
interest  from  which  it  does  not  spend! 

Since  life  loses  from  commercialism  in  many  other  ways 
than  the  directly  pecuniary,  in  lack  of  security,  spaciousness, 
refinement,  etc.,  the  real  situation  is  even  worse  than  this.  Yet 
this  degree  of  capitalism  is  expected  to  go  with  an  income 
from  wages  or  salary  of  only  five  to  eight  hundred  dollars, 
helped  out  with  from  four  to  seven  hundred  dollars  of  interest, 
if  it  spends  the  latter — or  wages  of  twelve  hundred  dollars  if 
it  does  not  spend  the  interest! 

Of  course,  there  are  very  few  families  among  those  pretending 
to  rely  upon  productive  wages  for  income  who  possess  this 
degree  of  invested  wealth.  Yet  with  any  less,  they  lose  upon 
every  cent  of  interest  taken  in. 

In  other  words,  the  capitalism  owned  by  a  family  must  be 
at  least  from  twelve  to  twenty  limes  its  annual  wages  or  salary, 
depending  upon  the  rate  of  interest  which  it  succeeds  in  drawing 
without  danger  of  losing  its  principal,  before  that  family  may 
even  hope  to  come  out  even  on  the  game  of  draw-interest-and- 
pay-it-back-across-shopcounter.  In  order  to  win  at  that  game 
it  must  own  far  more  capitalism  than  this. 

Rising  Prices. — But  the  above  is  stated  merely  in  terms  of 
the  momentary  balance  between  income  and  outgo.  Yet  the 
situation,  when  the  fluctuation  of  prices  is  included  in  the 
argument,  becomes  far  worse  than  this.  Since  capitalism  is 
steadily  and  rapidly  putting  up  prices,  so  that  a  dollar  to-day 
buys  far  less  than  a  decade,  or  even  a  year,  ago,  the  wage-earner 
loses  by  depreciation  of  the  purchasing-power  of  his  money  with 
time,  before  his  interest-return  comes  in,  as  well  as  by  momen- 
tary balance  of  his  ledger.  In  actual  fact,  a  family  possessing 
only  the  proportion  of  capitalism  to  wages  stated  above  will 
be  slipping  backwards,  rather  than  holding  its  own,  owing  to 
the  relatively  more  rapid  progress  of  the  big  commercialists  in 
accumulating  capitalism! 

Just  now  the  country  is  being  canvassed  for  Liberty  Loans, 
with  strenuous  appeal  to  invest,  for  the  sake  of  the  future,  in 
bonds  bearing  four  per  cent.  But  money  invested  at  this  rate, 
even  at  compound  interest,  requires  more  than  eighteen  years 
to  double  itself.  But,  if  prices  more  than  double  in  eighteen 
years,  as  they  are  certainly  doing  now,  it  is  actually  more 
thrifty,  under  the  efficient  conditions  imposed  by  the  commercial 


222  MODERN  ECONOMIC  TENDENCIES 

system,  to  spend  the  dollar  now  than  it  is  to  try  to  save  it 
against  the  future ! 

For  commercialism  provides  no  way  for  saving  it  without 
interest-charges  being  incurred.  It  believes — or  avers  that  it 
believes — that  without  the  interest-charges  there  would  be  no 
inducement  to  save.  Yet  it  is  actually  the  interest-charges 
themselves  which  annul  all  inducement  to  save!  They  actually 
eat  up  the  value  of  the  principal,  by  reducing  its  purchasing- 
power.  To-day  any  interest-rate  as  small  as  four,  or  even  six, 
per  cent  is  unquestionably  a  dead  loss  to  the  investor!  Yet  if 
he  seeks  a  higher  risk  he  invites  the  loss  of  his  principal ! 

With  any  rates  as  small  as  these,  or  with  proportionate  sums 
of  interest-earning  principal  to  wages  or  salary  as  rmall  as 
those  stated  above,  each  day  sees  a  measurable  loss.  To  whom- 
soever places  reliance  upon  petty,  passive  commercialism  as  an 
aid  to  wages,  ultimate  poverty  is  inevitable.  This  is  the  real 
explanation  of  the  present  world-wide  discontent,  which  is  felt 
by  a  class  of  people  far  more  sober,  industrious,  skillful  and 
respectable  than  superficial  public  opinion  takes  into  account. 

It  is  only  the  big,  skillful  commercialists,  acquiring  high 
rates  upon  large  sums,  through  unusual  combative  powers — 
and  never  losing  their  principal,  or  winning  more  often  than 
they  lose — who  come  out  ahead  at  the  game  of  interest-drawing, 
even  in  the  narrowest  pecuniar/  sense.  They  win  from  the 
petty  investors  just  as  surely  as  the  professional  gambler  wins 
from  the  transient  player  who  drifts  into  his  den.  In  the 
broader  sense  of  general  comfort,  prosperity  and  security  in  life 
even  the  biggest  capitalists  lose  at  their  own  game. 

Interest  not  a  Source  of  Value. — It  must  already  be  becom- 
ing plain  that  interest,  when  viewed  from  the  standpoint  of 
society  as  a  whole,  consists  merely  in  taking  money  out  of  one 
pocket  and  passing  it  (minus  certain  losses  on  the  way)  into 
another.  Interest  represents  no  natural  process  of  increase  in 
wealth.  Money  itself  has  no  natural  power  of  growth.  The 
useful  appliances  which  it  represents  inevitably  suffer  continual 
physical  depreciation  from  the  first  instant  of  their  creation. 

Surplus  money  or  credit  commands  interest  only  because  our 
surplus  stock  of  materials  cannot  be  made  fluid  for  circulation 
from  man  to  man,  across  the  open  gaps  in  ownership-in-industry 
now  dividing  man  from  man,  without  reliance  upon  this  surplus 
money  or  credit  for  effecting  transfer.  It  is  only  because  the 


INTEREST  AND  DIVIDENDS  223 

Ultimate  Consumer  is  so  involved  in  his  blind  faith  in  the 
policy  of  cultivating  his  income,  rather  than  of  conserving  his 
outgo,  that  he  is  willing  to  pay  tribute  in  the  form  of  interest 
in  order  to  effect  a  carry  across  these  gaps. 

There  is  no  desire  to  argue  here  that,  to  date,  he  has  not 
been  slightly  better  off,  on  the  average,  in  paying  this  tribute 
rather  than  in  foregoing  all  privilege  of  economic  intercourse 
with  his  fellowmen — a  privilege  now  purchasable  only  by  pay- 
ments of  interest.  But  the  fact  is  irrelevant.  The  gains  have 
been  due  not  to  interest-payments,  but  to  progress  in  the 
technical  arts  made  by  salaried  or  wage-paid  men.  The  economic 
loss  involved  in  thus  deferring  this  privilege  to  demands  for 
tribute  in  the  form  of  interest  is  an  exact  parallel  with  our 
simultaneous  loss  of  self-respect.  Mankind  has  been  either 
shamefully  stupid  or  shamefully  supine,  that  it  has  ever  let 
itself  get  confronted  with  the  alternative  of  either  paying  the 
tribute  or  going  without  the  transfer. 

Indeed,  in  the  chapter  upon  Credit  many  instances  were  given 
of  how  these  ubiquitous  gaps  in  ownership  between  commer- 
cialist  and  Consumer,  which  now  everywhere  fissure  our 
economic  system  as  crevasses  traverse  a  glacier — and  which  can 
be  bridged  for  the  life-support  of  the  Ultimate  Consumer  only 
by  the  payment  of  tribute,  in  the  form  of  interest,  for  access 
to  somebody's  private  capitalism — are  obstacles  which,  rather 
than  being  natural  and  inevitable,  are  artificially  and  deliberately 
created  by  commercialism,  and  industriously  widened  from  day 
to  day,  just  in  order  to  reap  the  tribute  called  interest  which 
thereby  becomes  inevitable. 

Capitalism  is  exactly  like  a  man  who  might  dig  a  ditch  across 
a  road,  then  bridge  the  ditch,  and  then  collect  fancy  tolls  for  the 
privilege  of  using  the  bridge — posing,  the  while,  as  a  benefactor 
in  having  built  the  bridge. 

If  able  commercialists  wish  to  realize  what  is  meant  by  this, 
let  them  cease  their  present  efforts  at  organizing  stockholders, 
to  raise  prices,  and  undertake  the  organization  of  the  Ultimate 
Consumers  to  bring  prices  down. 

Depreciation. — As  stated  above,  all  wealth  suffers  deprecia- 
tion from  natural  causes,  from  the  first  instant  of  its  creation. 
At  least,  all  material  capital  does  so.  Capitalism,  however,  does 
not;  and  in  this  contrast  between  capital  and  capitalism  lies 


224  MODERN   ECONOMIC   TENDENCIES 

one  of  the  distinctions  most  pregnant  with  significance  for  the 
economic  trend  of  the  times. 

The  very  existence  of  an  accumulation  of  material  wealth  is 
a  burden  to  the  community,,  through  its  physical  depreciation, 
unless  its  presence  be  justified  by  either 

(1)  Its  active  use  by  labor  in  multiplying  the  rate  or  ease  of 
current  production,  or 

(2)  As   an   insurance   against  famine  during   adverse   sea- 
sons, or 

(3)  For  extension  of  facilities. 

Even  then  a  certain  amount  of  labor  must  currently  be  set 
aside  to  make  good  its  natural  depreciation.  Only  when  the 
usefulness  of  the  accumulation  exceeds  this  current  depreciation 
is  the  existence  of  the  capital  profitable  to  the  community,  rather 
than  a  loss. 

Sometimes  interest  is  explained  as  due  the  owner  of  capital 
in  order  to  make  good  this  depreciation.  The  answer  to  this 
is  obvious.  No  real  interest  exists  until  after  the  current  pay- 
ments made  by  the  Ultimate  Consumer  to  the  capitalist  have 
offset  depreciation,  and  exceeded  it. 

If  interest  were  merely  an  offset  to  depreciation  then  the 
capitalists  as  a  class  would  be  no  richer  to-day  than  they  were 
a  century  ago.  The  most  patent  facts  of  commercial  history 
make  it  not  worth  while  to  pursue  this  line  of  inquiry. 

Water  or  Rust? — Take  for  illustration  a  bond  or  stock-cer- 
tificate issued  many  years  ago,  ostensibly  to  cover  the  cost  of 
certain  appliances  needed  for  extension  of  facilities.  During 
the  life  of  this  paper  these  appliances  have  surely  depreciated, 
by  rot  and  wear  or  tear,  to  nothingness;  or  if  not  that,  they 
have  become  obsolete  and  worthless  by  the  progress  of  events. 
Yet  neither  the  face-value  nor  the  market-valuation  of  the  paper 
in  the  commercial  world  has  depreciated,  for  that  reason,  ly 
one  penny. 

The  valuation  of  the  paper  depends  solely  upon  its  ability 
to  extract  from  the  Ultimate  Consumer  by  force  the  tribute 
called  interest;  and  that  is  the  same  or  greater  to-day  than 
when  the  paper  was  first  issued.  The  Consumer  is  to-day  paying 
interest  upon  billions  of  investments  nominally  representing 
appliances  (so  far  as  it  is  yet  worth  while  to  keep  up  the 
pretense  of  its  representing  anything)  which  long  ago  fell  into 
rust  and  dust. 


INTEREST  AND   DIVIDENDS  225 

Yet  not  only  is  it  true  that  the  demands  for  interest  upon 
these  securities  have  not  abated  one  jot,  but  the  principal  of 
the  debt  fastened  thereby  upon  society  has  not  depreciated  by 
a  dollar.  So  far  as  the  equities  or  practice  of  commercialism 
is  concerned,  a  century  hence  will  find  our  great-grandchildren 
still  burdened  with  this  same  indebtedness  to  the  capitalist  as 
now,  or  even  a  greater  one,  for  appliances  bought  before  the 
Civil  War,  used  up  while  Hayes  was  president,  and  rotted  before 
this  present  century  opened ! 

During  this  time  the  gradual  physical  depreciation  of  these 
appliances  has  actually  been  made  good  out  of  the  payments 
made  by  the  public  for  commodities  and  service ;  for  depreciation 
is  a  legitimate,  natural  charge  against  the  Ultimate  Consumer 
making  use  of  appliances.  Therefore  all  these  interest-payments 
stand  as  additional  to  payments  for  depreciation. 

Yet  they  have  not  been  credited  to  the  Consumer  on  any 
other  account.  He  still  owes  the  full  principal  of  the  debt,  and 
no  capitalist  will  listen  to  any  plan  for  letting  him  pay  it. 

Commercial  Authorities  upon  the  Origin  of  Capitalism. — 
For  further  light  upon  the  nature  of  interest  let  us  turn  away 
from  the  loose  talk  of  the  man-in-the-street  to  some  statements 
made  by  prominent  commercialists  themselves,  under  oath.  Take 
for  instance  the  testimony  of  the  Illinois  Central  Railroad 
before  the  Interstate  Commerce  Commission  in  1910  (Docu- 
ment 725,  61st  Congress,  Third  Session).  The  road  entered 
an  exhibit  showing  that  its  actual  cost  to  date,  including  better- 
ments and  extensions,  had  been  $277,000,000,  with  which  it 
compared  its  then  capitalization  at  $285,000,000 — the  figure  on 
which  it  had  requested  permission  to  earn  a  "reasonable  return/' 
whatever  that  may  be.  This  cost  had  been  determined  by 
starting  with  the  recorded  "cost"  of  the  road  when  first  built, 
in  1856,  of  $19,000,000. 

We  overlook,  for  the  moment,  many  interesting  questions  as 
to  just  how  this  paper  indebtedness  arose,  step  by  step,  from 
the  original  figure  for  a  few  hundred  miles  of  single  track  to 
nearly  three  hundred  millions  of  dollars  for  a  great  system  of 
nearly  five  thousand  miles.  We  overlook  the  important,  but 
futile,  question  whether  even  the  original  nineteen  millions  had 
not  already  been  made  much  larger  than  was  necessary,  with 
the  deliberate  purpose  of  "earning"  interest  thereon — for  the 


226  MODERN   ECONOMIC   TENDENCIES 

railroads,  however  they  may  have  been  copied  elsewhere  since 
then,  were  the  pioneers  in  high  finance. 

The  sole  point  at  present  is  that  every  foot  of  that  original 
road  of  1856  lias  become  at  least  once,  and  most  of  it  twice, 
completely  worn  or  rotted  to  nothingness;  or  become  so  obsolete 
as  to  be  worthless!  Yet  not  a  dollar's  worth  of  its  capitalization 
has  been  canceled! 

This  is  so  by  the  repeated  testimony  of  the  road's  own  officers, 
arguing  the  vast  sums  which  have  had  to  be  expended  for 
upkeep  and  betterment.  They  forget  that  the  only  conclusion 
enforced  by  these  facts  is  that  every  penny  of  this  original 
indebtedness  of  nineteen  millions,  and  much  of  the  additional 
$258,000,000,  ought,  in  the  most  ordinary  equity  to  the  public, 
to  have  been  canceled  long  ago  by  sinking-fund,  and  not  re- 
funded, so  that  it  no  longer  formed  any  part  of  the  community's 
economic  burden  in  1910. 

Yet  this  case  of  the  Illinois  Central  is  in  no  wise  an  extreme 
or  unusual  one.  It  was  not  challenged  by  the  Interstate  Com- 
merce Commissioners  as  such.  It  merely  illustrates  well  (by  a 
case  so  favorable  to  the  railroads  as  to  be  selected  by  themselves 
from  among  many,  for  representing  them  all  before  the  Com- 
mission) the  normal  procedure  of  the  financial  world  and  the 
public's  acceptance  of  it  as  "business." 

It  might  be  said  here  that  this  and  further  quotations  from 
testimony  by  the  railroads  are  not  adduced  because  the  railroads 
are  in  any  wise  exceptional  offenders,  but  merely  because  their 
public  character  forces  into  the  limelight  statements  concerning 
them  which  bear  upon  the  true  nature  of  commercialism,  from 
authorities  high  in  that  field,  such  as  are  not  to  be  had  in  any 
other  business.  There  is  scarcely  a  corner-grocery  in  the  land, 
not  to  mention  the  common  run  of  corporations,  which  is  not 
following  exactly  this  same  financial  policy  as  the  railroads; 
but  their  smaller  size  and  greater  number  permit  them  to  "get 
away  with  the  goods/'  where  the  railway-companies  are  caught 
and  held  up  to  public  execration.  But  it  is  the  prime  object 
of  this  work,  however  it  may  be  forced  to  cull  from  the  railroads 
the  facts  which  it  condemns,  to  unmask  this  pose  of  innocence 
on  the  part  of  the  multitude  of  petty  commercial  sinners,  and 
to  show  that  they  are  just  as  guilty  in  degree,  and  cumulatively 
far  more  so  in  volume,  than  are  the  railroads. 

All  this  bears  directly  upon  the  common  allegation  that  in- 


INTEREST  AND   DIVIDENDS  227 

terest  is  justified  provided  it  be  paid  upon  moneys  which  have 
been  actually  expended  for  appliances;  or  in  other  words  that, 
provided  the  stock  has  not  been  "watered/'  dividends  upon  it 
are  equitable.  Without  stopping  here  to  debate  this  question 
in  full,  it  must  be  clear  that  if  the  existence  of  these  appliances 
is  what  justifies  interest,  then  their  disappearance  must  remove 
that  justification.  However  honest  an  investment  may  have  been 
originally,  twenty  years  later  its  physical  embodiment  is  sure 
to  be  pure  water  or  dust.  As  the  appliances  rot,  wear  out  or 
become  obsolete,  the  interest-payments  upon  them,  in  equity, 
should  gradually  cease. 

But  this  never  occurs.  The  commercial  world  to-day  cares 
not  one  hurrah,  in  reality,  whether  its  interest-bearing  paper 
represents  actual  appliances  or  not.  The  sole  question  attaching 
to  it  is :  Can  it  be  made  to  draw  interest  or  pay  dividends  ? 

Interest  as  a  Fruit  of  Unproductivity. — Another  contention 
in  favor  of  the  justice  of  interest  to  which  preliminary  attention 
may  be  given  here — and  this  is  the  only  contention  which  appears 
to  offer  even  a  ghost  of  reasonableness — is  that  interest  is  in- 
curred by  reason  of  loans  or  requisitions  made  for  the  purpose 
of  creating  some  extension  of  facilities  which  cannot  be  expected 
to  be  productive  for  some  time  in  the  future. 

It  has  already  been  pointed  out,  in  effect,  that  the  natural, 
or  factory-system,  method  of  making  requisitions  for  the  exten- 
sion of  facilities,  without  asking  interest  thereon,  depends  not 
at  all  upon  any  idea  that  the  new  facilities  must  immediately 
become  productive.  The  factory's  stockroom  stands  there  for 
the  express  purpose  of  tiding  over  this  interregnum  period  until 
the  new  shall  have  become  productive,  be  it  short  or  long. 

But  however  this  may  be,  certain  it  is  that,  in  either  equity 
or  common  sense,  an  interest-bearing  debt  which  has  been  in- 
curred for  the  purpose  of  tiding  over  this  unproductive  period, 
with  its  interest  explained  as  being  due  to  this  unproductivity, 
must  cease  to  bear  interest,  and  must  cease  to  be  a  debt,  as  soon 
as  the  enterprise  has  become  productive.  In  equity,  the  first 
destination  of  any  profits  must  be  to  cancel  all  outstanding 
interest-bearing  indebtedness. 

Any  failure  of  those  in  control  to  provide  for  this  enforces 
immediately  the  conclusion  that  the  indebtedness  was  incurred, 
in  actuality,  not  for  the  sake  of  the  new  facilities,  nor  the 
interest  paid  because  those  facilities  were  not  immediately 


228  MODERN    ECONOMIC    TENDENCIES 

productive — which  statements  serve  merely  as  an  insincere  excuse 
— but  solely  for  the  sake  of  exacting  continuous  tribute,  called 
interest. 

Now  all  of  the  broad,  patent  facts  of  the  commercial  world 
drive  one  irresistibly  to  the  acceptance  of  this  latter  alternative. 
It  is  plainly  not  the  new  and  unproductive  enterprises  which 
pay  all,  nor  even  any  appreciable  part,  of  the  aggregate  interest 
paid.  The  ~bulk  of  all  interest-payments  come  from  those  enter- 
prises which  are  the  most  intensely  productive,  and  which  have 
been  so  for  the  longest  time!  There  is  not  even  a  ghost  of  a 
pretense  among  the  commercialists  themselves,  although  there 
is  among  our  university-puppets,  that  things  are  otherwise. 

It  is  everywhere  obvious,  to  those  having  the  slightest  desire 
to  observe  the  truth,  that  it  is  just  those  concerns  which  have 
unquestionably  been  most  profitable  for  decades  or  generations, 
whose  securities  "earn"  the  highest  rates  of  interest  or  dividends, 
which  are  constantly  refunding  those  securities  in  largest  volume, 
and  whose  capitalization  is  increasing  most  surely,  rather  than 
decreasing  most  rapidly,  because  of  their  high  rates  of  produc- 
tivity. 

Indeed,  new  enterprises  are  habitually  launched  with  the 
most  emphatic  promises  that  soon  large  profits  will  permit  large 
payments  of  dividends!  But,  if  all  this  be  so,  then  dividends 
certainly  cannot  rest  upon  temporary  unproductivity  as  their 
excuse. 

Opportunity  for  Investment. — The  unremitting  pressure  of 
the  entire  financial  world,  the  publicly  avowed  demands  of  the 
railway-corporations  before  our  Interstate  Commerce  Commis- 
sion, the  ceaseless  activity  of  every  inventor  having  also  the 
commercial  instinct,  the  unquestioned  methods  of  every  broker, 
promoter  or  agent,  and  the  continual  intrusion  of  new  business- 
enterprises  into  districts  already  fully  served — all  these 
prominent  and  indubitable  characteristics  of  the  commercial 
world  stand  as  evidence  of  its  utter  indifference  to  the  interests 
of  .the  Ultimate  Consumer,  as  its  guiding  force,  and  of  its 
insatiable  appetite  for  this  tribute  called  interest  or  dividends — 
an  appetite  which  limits  itself  by  no  law  nor  reason  whatever, 
except  the  sheer  inability  of  the  Ultimate  Consumer  to  pay 
further  tribute. 

These  facts  concerning  commercialism  all  record  a  continuous, 
deliberate,  energetic  and  reckless  expansion,  rather  than  any 


INTEREST  AND   DIVIDENDS  229 

rational,  judicious  or  wholesome  retraction,  of  this  volume  of 
interest-bearing  burden  upon  the  Ultimate  Consumer,  to  confine 
it  to  those  enterprises  and  periods  during  which  unproductivity 
is  unavoidable.  New  securities  are  constantly  being  issued;  but 
none,  in  effect,  are  ever  retired.  Those  which  mature  are  always 
refunded,  either  directly  or  indirectly,  in  ever  greater  and  greater 
volume. 

In  not  one  atom  of  all  this  is  there  solid  basis  for  any  sincere 
argument  that  the  debt  is  created  merely  to  tide  over  the  un- 
productive period — and  hence  is  to  be  canceled  forever  out  of 
the  first  earnings.  Instead,  the  larger  those  earnings  may  be- 
come the  higher  is  the  rate  of  interest  paid,  or  the  greater  is 
the  expansion  of  the  securities  in  volume.  There  has  been  from 
the  start  no  other  aim  in  mind  than  this! 

Indeed,  the  sole  limitation  upon  the  issue  of  ever  larger 
volumes  of  such  securities,  for  the  sake  of  increasing  the  burden 
of  tribute  exacted  from  the  Ultimate  Consumer,  is  avowedly 
the  sheer  ability  of  the  public  to  pay  the  interest  or  dividends 
thereon,  in  the  form  of  prices  collected  across  the  retail-shop- 
counter.  As  soon  as  this  ability  has  been  demonstrated,  in 
connection  with  any  particular  set  of  securities,  these  are  said 
to  have  been  "absorbed."  If  the  public  shows  signs  of  inability 
to  pay  the  tribute,  then  warning  is  recognized  therein  that  the 
traffic  (of  issuing  securities)  has  been  "charged  all  it  will  bear." 

Water  or  Dust. — Whether  or  not  these  securities  may  have 
been  originally  issued  against  any  real  expenditure  for  useful 
appliances — which  will  all  have  become  a  matter  of  indifference 
twenty  or  thirty  years  from  the  date  of  issue — their  market-value 
has  become,  through  the  fact  of  <f  absorption/ f  equal  to  their 
face-value.  Whether  created  from  sheer  water  in  the  first  place, 
or  from  that  which  will  soon  become  dust,  they  have  thereby 
become  real  and  usually  permanent  money — exchangeable  for 
gold.  Their  lien  upon  the  people's  wealth  is  measured  in  dollars 
each  one  of  which  derives  its  value  from  some  man's  toil  or 
some  woman's  tears. 

All  that  they  are  has  come  not  at  all  from  within  themselves, 
but  wholly  by  addition  from  without,  through  the  energy  and 
sacrifice  of  the  public  of  Ultimate  Consumers.  Their  own 
foundation  rests  upon  no  permanent  actuality  of  purchased 
appliance,  but  upon  a  mere  gap  in  continuity  of  ownership 
where  none  should  exist — a  mere  "fault,"  as  the  geologists  would 


230  MODERN   ECONOMIC   TENDENCIES 

say,  in  our  economic  organization.  From  the  moment  of  their 
absorption  forward,  for  a  time  interminable  by  any  statute  or 
equity  now  recognized  by  either  the  commercial  world,  the  courts, 
the  universities  or  our  federal  Constitution,  both  the  securities 
and  the  interest  thereon  stand  as  a  sheer  hold-up  of  the  com- 
munity— a  privately  assessed  tax,  enacted  without  the  consent 
or  knowledge  of  those  assessed,  and  collected  under  duress  from 
every  Consumer  in  the  land — a  diluent  of  the  purchasing-power 
of  every  dollar  which  crosses  a  shop-counter  anywhere  in  the 
commercial  world,  without  regard  either  to  political  boundaries, 
to  commercial  unities  or  to  human  equities. 

Economic  Hypnosis. — Yet  it  is  a  tax  which  is  not  paid 
willingly  nor  spontaneously  by  the  Ultimate  Consumer.  It  can 
be  extracted  from  the  unwilling  victim  only  after  he  has  been 
drugged  into  subconsciousness,  or  into  grudging  acquiescence, 
by  a  most  indirect  and  disguised  method  of  collection.  It  is 
accomplished  only  through  a  systematic  hypnosis  of  the  public 
through  brilliant  shop-display,  clever  advertisements,  profes- 
sionally trained  salesmen,  concealed  ledgers  and  utterly  rotten 
text-books  in  political  economy. 

It  requires  the  united,  continuous  and  strenuous  efforts  of  the 
entire  commercial  world  to  maintain  in  halting  operation, 
against  the  real  interests  of  the  Ultimate  Consumer,  such  a  sheer 
"frame-up"  as  that — a  systematic  deception  of  the  entire  people, 
as  to  what  they  are  getting  for  their  money,  which  is,  in  effect, 
just  as  fraudulent,  just  as  unstable,  and  ultimately  destined  to 
be  just  as  volcanic  under  civilization,  as  was  ever  the  "kultur" 
propaganda  of  Prussian  militarism. 

For  modern  fraud  does  not  lie  in  the  crass  adulteration  of 
the  physical  thing  sold,  which  is  too  clumsy  a  swindle  to  figure 
largely  to-day.  It  lies,  instead,  in  the  constantly  increasing 
adulteration  of  the  purchasing-power  of  the  Consumer's  dollar, 
and  a  continual  deception  of  the  people  by  a  false  propaganda 
in  political  economy  as  to  this  fact.  How  the  professors  of 
political  economy,  to  whom  we  are  entrusting  our  youth  for 
guidance  through  the  intricate  and  menacing  problems  of  the 
near  future,  dare  to  teach  such  insincere  rot,  unsupported  as 
it  is  by  any  slightest  fact  concerning  commercialism,  it  is 
impossible  to  comprehend.  It  might  be  expected  that  even  these 
irresponsible,  though  official,  apologists  for  the  hollow  fraud 
called  "business"  would  realize  that  they  are  thereby  inevitably 


INTEREST  AND   DIVIDENDS  231 

losing  the  world's  last  vestige  of  faith  in  their  intelligence  and 
sincerity. 

Economic  Equilibrium. — By  the  path  outlined  above  we  have 
now  reached  the  proper  point  for  inquiry  as  to  how  may  be 
determined  both  the  volume  and  the  interest-rate  of  those 
profitable  debts  which  are  constantly  being  foisted  upon  the 
people  by  the  commercialists.  In  this  we  have  now  for  the 
first  time  come  into  contact  with  a  principle  of  economic  equilib- 
rium so  wide  and  so  basic  that  its  influence  extends  far  beyond 
any  mere  question  of  interest  and  dividends. 

This  principle  permeates  every  cell  of  our  intricate  body 
economic,  determining  all  manner  of  questions  as  to  volumes, 
rates,  prices,  qualities  and  relative  proportions  prevailing  in  our 
everyday  world  of  statistics  and  activities.  More  than  that,  it  is 
a  local  manifestation,  in  economic  phenomena,  of  one  of  the 
greatest  of  those  natural  principles  of  cosmic  equilibrium — the 
laws  of  gravitation  and  of  fluid  equilibrium — in  the  hands  of 
which  not  merely  solar  systems  and  kings,  but  even  world- 
democracies,  are  but  puppets. 

So  basic  and  dominant  is  our  control  by  this  principle  of 
economic  equilibrium,  in  all  which  is  to  be  debated  hereinafter, 
that  a  digression  must  be  made  here  in  order  to  establish  well 
its  understanding.  A  chapter  will  be  devoted  to  it  exclusively. 
After  that  a  return  will  be  made  to  the  unfinished  topic  of 
interest  and  dividends. 


CHAPTER   XI 

ECONOMIC  EQUILIBRIUM,  OR  "CHARGING  ALL  THE  TRAFFIC  WILL 


IN  the  productive  field  of  industry,  which  we  have  called 
herein  the  national  factory-system,  any  effort  exerted  by  the 
producer  is  beneficial  both  to  the  Ultimate  Consumer  and  to 
himself.  The  harder  or  more  skillfully  the  producer  works, 
and  the  more  he  earns  as  just  wages  in  equivalent  for  what 
he  produces,  the  richer  is  the  Consumer  as  well  as  himself. 
For  both  draw  their  increased  welfare  from  a  source,  namely, 
the  life-producing  interaction  between  production  and  consump- 
tion, to  the  fruitfulness  of  which,  working  in  an  unending  cycle, 
no  natural  limit  has  yet  become  visible. 

But  in  the  commercial  field  of  the  market-system,  on  the 
other  hand,  the  greater  the  effort  of  the  commercialist,  or  the 
larger  his  income,  whether  derived  through  active  combat  or 
through  passive  ownership,  the  poorer  is  the  Ultimate  Consumer. 
This,  as  has  already  been  explained,  is  baldly  due  to  the  fact 
that  the  commercialisms  efforts  are  non-productive;  wherefore 
his  income  can  consist  only  of  an  abstraction  from  the  welfare 
of  the  Consumer. 

But  under  what  conditions  does  this  occur?  Is  ftiis  abstrac- 
tion performed  without  penalty  to  the  commercialist  himself, 
aside  from  its  hardship  for  the  Ultimate  Consumer?  Is  it 
limitless  ?  If  not,  wherein  does  the  process  find  its  natural  limit  ? 

Is  this  limit  found  in  some  stability  of  equilibrium,  tending 
always  to  hold  the  process  within  some  definable,  if  elastic, 
degree?  Or  is  this  process  of  robbing  the  Consumer  quite 
arbitrary,  irresponsible,  spasmodic  and  indeterminate? 

The  answer  is  that  commercial  combat,  being  a  natural 
phenomenon,  acts  always  in  stable  equilibrium,  as  do  all  physical 
phenomena.  However  unnatural  it  may  be  in  the  sense  of 
being  dissipative  of  human  effort,  and  therefore  undesirable 
for  human  life  and  growth,  yet  it  must  function  within  the 

232 


ECONOMIC   EQUILIBRIUM  233 

same  laws  of  equilibrium  with  all  other  physically  dissipative 
and  humanly  undesirable  phenomena.  Therefore  it  tends  to 
gravitate  in  a  certain  direction  which  is  definable,  toward  a  limit 
which  is  definable. 

This  limit  appears  in  a  stable  balance  between  two  opposed 
forces.  One  of  these  forces  is  the  tendency  of  the  dealer,  natural 
under  the  influence  of  profits,  to  raise  prices.  The  opposing 
force  appears  in  the  Consumer's  refusal  to  accept  the  higher 
price. 

But  this  refusal,  it  is  particularly  to  be  noted,  does  not  lie 
in  his  conscious,  rational  revolt  against  the  higher  price,  acting 
in  any  way  effective  to  remedy  the  situation.  For  a  Consumer's 
rejection  of  a  higher  price  means  merely  his  going  further  to 
accept  the  same  price,  after  he  has  become  used  to  the  idea, 
or  to  come  back  and  accept  it  from  the  same  dealer  after  he 
has  gotten  over  his  indignation — all  of  which  is  childishly  inef- 
fective. The  only  effective  bar  to  rising  prices  (while  commer- 
cialism holds  sway)  lies  in  the  Consumer's  subconscious,  physical 
inability  to  continue  his  purchases  in  undiminished  volume,  as 
the  price  rises. 

An  Illustration. — For  instance,  imagine  a  community  having 
$1000  a  month  to  spend  for  flour.  Imagine  that  a  complete, 
national  factory-system  could  supply  this  flour  to  the  Ultimate 
Consumer,  including  the  natural  cost  of  retail  distribution,  at 
the  price  of  $10  per  barrel.  Then  100  barrels  per  month  would 
be  consumed.  This  is  the  natural,  100-per-cent  situation,  ex- 
hibiting the  community's  normal  volume  of  production  and 
consumption. 

But  imagine  now  that  the  community  is  careless  enough  to 
let  some  group  of  commercialists  append  to  the  community's 
factory-system  their  costly,  competitive,  duplicative,  profit-seek- 
ing system,  making  the  price  of  flour,  say,  $11.11.  Then  only 
ninety  barrels  per  month,  at  most,  can  be  sold.  These  cost  the 
commercialist  who  handles  them  only  $900.  He  sells  them  for 
$1000,  and  "makes"  $100  of  gross  profits. 

It  is  particularly  to  be  noted,  at  this  point,  that  it  makes 
no  slightest  difference  to  the  line  of  analysis  which  we  are 
pursuing  here,  nor  to  the  welfare  of  the  community,  whether 
this  $100  be  all  net  profit,  going  into  the  commercialist's  pocket, 
to  enrich  him  "too  fast,"  or  whether  some  part  of  it  is  paid 
to  underlings  in  wages,  or  whether  it  is  all  lost  in  "costs  of 


234  MODERN   ECONOMIC  TENDENCIES 

doing  business/'  so  that  the  commercialist  makes  nothing,  and 
may  eventually  become  bankrupt.  The  sole  point  of  importance 
to  the  community  is  that  some  sort  of  unnecessary  commercial 
cost  has  been  added  to  the  natural  factory-system  cost,  thus 
diminishing  the  volume  of  consumption. 

If  now  the  commercialist  raises  his  price  to  $12.50  per  barrel, 
then  only  eighty  barrels  per  month,  at  most,  can  be  sold  and 
eaten.  Yet  on  this  smaller  amount  of  goods  his  aggregate 
profits  will  be  the  difference  between  $800  and  $1000,  or  $200— 
twice  that  before.  His  income  has  risen  as,  and  actually  because, 
the  supply  of  nutriment  to  the  community  has  fallen! 

Consequently  and  most  naturally,  he  will  continue  to  raise 
his  price.  The  resultant  diminution  of  nutriment  to  the  com- 
munity will  act  as  no  deterrent  whatever  to  this  process.  Not 
only  is  that  not  his  "business,"  which  is  to  make  profits — the 
community  has  told  him  so — but  he  cannot  return  the  volume 
of  consumption  to  normal  without  foregoing  all  profits;  and 
if  he  does  that  he  must  go  out  of  business  altogether.  Then 
the  community  (failing  in  sense  enough  to  organize  and  main- 
tain its  own  factory-system)  will  have  no  nutriment  at  all ! 

But  we  are  bound  to  accept  in  our  premises  a  community 
of  Ultimate  Consumers  too  lax  to  control  that  industrial  system 
every  conceivable  cost  of  which  it  already  pays,  across  shop- 
counter.  It  is  too  lax  even  to  stop  and  think  what  forces  it 
sets  going  when  it  tells  every  man  to  buy  anything  he  can, 
at  as  low  a  price  as  he  can,  and  then  to  rely,  for  his  income, 
upon  reselling  it  at  a  higher  price. 

Hence  the  only  conceivable  stop  to  this  process  of  raising 
prices  is  the  point,  ultimately  sure  to  be  reached,  where  further 
rise  in  price  diminishes  gross  profits.  At  that  point,  and  not 
before,  the  commercialist  will  stop  raising  prices — but  with  the 
community  already  starved  far  below  its  natural  supply  of 
flour. 

Competition  no  Corrective. — Nor  is  commercial  competition, 
the  factor  so  widely  worshiped,  in  popular  economic  supersti- 
tions, as  the  stimulant  of  trade  and  the  reliable  bar  to  undue 
elevation  of  price,  any  obstacle  whatever  to  progress  "too  far" 
in  this  policy  of  depressing  the  volume  of  trade  by  raising  the 
price.  Competition,  it  is  true,  ensures  that  no  one  commer- 
cialist may  raise  his  prices  appreciably  faster  than  any  other; 
but  it  constitutes  a  most  powerful  incentive  to  all  commer- 


ECONOMIC   EQUILIBRIUM  235 

cialists  to  raise  their  prices  simultaneously,  and  thereby  to 
reduce  the  volume  of  trade  still  further  below  normal. 

Indeed,  competition  will  be  found,  upon  investigation,  to  be, 
in  reality,  an  irresistible  compellant  to  raise  prices.  This  is  so 
because  the  keen  spur  of  competition  drives  every  dealer  to 
seek,  before  all  other  things,  a  larger  fraction,  relatively  to  his 
competitors,  of  whatever  volume  of  trade  may  be  available ;  and 
to  do  this  he  must  expand  all  his  costs  of  doing  business — his 
advertising,  drumming,  illumination,  etc. 

Irrelevance  of  Whether  Profits  be  Gross  or  Net. — But  all 
of  this  merely  exaggerates  the  margin  of  price  asked  above 
natural  cost;  and  in  the  depression  of  trade  by  high  prices 
it  is  not  at  all  the  nature  of  this  margin,  nor  its  destination, 
but  its  sheer  magnitude,  which  alone  determines  the  sag  of  trade 
below  its  normal  volume.  Whether  the  dealer  himself  enjoys 
this  margin  between  natural  cost  and  price  asked,  in  the  form 
of  net  profits,  or  whether  it  be  all  eaten  up  in  cost  of  doing 
business,  makes  no  difference  whatever  as  to  the  decrease  in  the 
volume  of  goods  which  the  Consumer  can  buy  at  the  super- 
natural price. 

Since  these  costs  of  doing  business  can  be  reduced  only  by 
the  elimination  of  all  competition,  and  the  return  to  the  pure 
factory-system  of  supply,  competition  will  be  found  to  be  the 
worst  possible  aggravant  of  high  prices.  This,  briefly  speaking, 
is  the  recent  economic  history  of  our  country.  The  allurements 
of  higher  commercial  incomes  have  drawn  people  steadily  away 
from  productive  tasks  into  commercialism.  Their  entrance  there 
has  enhanced  competition.  Keener  competition  has  forced  the 
multiplication  of  costs  of  doing  business,  until  now  almost  any 
sums  are  spent  in  order  to  secure  trade.  These  growing  costs 
of  doing  business  have  forced  prices  up  while,  and  in  spite 
of  the  fact  that,  true  costs  of  production,  through  the  increasing 
efficiency  of  our  machinery,  have  been  falling. 

An  Economic  Misapprehension. — In  the  long  run,  net  profits 
are  not  determined  by  subtracting  from  a  fixed  margin  these 
increasing  costs  of  doing  business.  Instead,  the  net  profits  not 
only  remain  unchanged,  but  may  even  increase,  while  the  costs 
of  doing  business  also  increase.  The  explanation  lies  in  the 
elasticity  of  the  margin — in  the  higher  price  paid  by  the  Ul- 
timate Consumer,  which  is  the  sum  of  these  two  factors,  both 
of  them  ever  increasing. 


236  MODERN    ECONOMIC   TENDENCIES 

Indeed,  it  is  one  of  the  chief  lessons  of  this  book  that  it  is 
not  the  increasing  wealth  of  the  few,  however  wrong  that  may 
be,  which  is  the  most  insidious  poison  in  our  economic  system. 
It  is,  instead,  this  rapidly  increasing  burden  upon  the  Ultimate 
Consumer  of  these  uncontrollably  expanding  costs  of  doing 
business,  which  benefit  no  one. 

For  the  net  profits,  if  too  large,  are  easily  seen,  and  might 
conceivably  be  returned  to  the  Consumer  by  forcible  abstraction. 
This,  indeed,  is  the  idea  underlying  all  modern  discontent 
voicing  itself  either  as  socialism  or  in  the  form  of  income-tax. 
But  the  wastes  of  commercial  competition,  on  the  other  hand, 
which  are  by  far  the  larger  factor  in  making  people  poor,  are 
hopelessly  lost  forever.  Once  they  have  been  incurred,  no  human 
effort  can  regain  them.  Once  admit  the  sacred  right  of  every 
man  to  buy  anything  he  chooses,  reselling  at  a  concealed  margin, 
and  no  power  on  earth  can  prevent  these  costs  from  expanding 
indefinitely. 

Character  of  Forces  at  Work. — Before  attempting  any 
mathematical  computation  of  the  price  and  volume  of  trade  at 
which  the  commercialisms  return  becomes  a  maximum,  let  us 
debate  further  the  nature  of  that  balance  of  forces  which  is 
at  play  within  every  negotiative  bargain;  for  there  is  scarcely 
any  problem  in  economics  wherein  the  psychology — or  rather, 
the  lack  of  psychology — is  more  commonly  misunderstood  than 
this. 

For  the  basic  fact  underlying  all  determination  of  prices  is 
that  the  point  at  which  the  income  of  the  commercialist  is  no 
longer  increased  by  a  further  increase  in  price — which  is  the 
point  for  which  every  commercialist  is  instinctively  groping, 
with  greater  or  less  acumen,  as  he  selects  his  prices — is  one 
determined  statistically  and  intellectually,  and  not  at  all 
psychologically  or  morally. 

Indeed,  there  occurs  no  balance  of  psychological  forces  what- 
ever. The  problem  demands  of  the  seller  merely  accuracy  of 
record,  to  determine  at  what  price  he  is  making  the  most  money, 
and  not  at  all  any  conscience  or  altruism  of  heart.  He  is  just 
as  willing  to  lower  prices  as  to  raise  them — he  will  doubtless 
prefer  to  do  so — if  only  he  can  thereby  increase  his  profits. 

The  whole  picture  so  popular  with  the  demagogic  editors  and 
others — of  a  seller  or  "profiteer"  impelled  by  unnatural,  repre- 
hensible greed  to  raise  prices,  out  of  sheer  malice — which  de- 


ECONOMIC    EQUILIBRIUM  237 

praved  tendency  is  to  be  counteracted,  of  course,  by  appeals  to 
his  conscience,  or  to  his  fear  of  the  law — is  as  baseless  in  fact, 
as  childish  a  creation  of  the  imagination,  as  futile  in  its  explana- 
tion of  the  situation,  and  as  mischievous  in  its  effect  upon  public 
stability  as  were  the  griffins  of  ancient  mythology,  or  the 
witches  of  medieval  superstition.  The  play  of  contending  forces 
is  quite  otherwise  than  this,  and  neither  conscience  nor  the  law 
can  exert  any  slightest  control  over  it. 

The  Premises  for  High  Prices.— The  stage  has  been  set, 
in  the  first  place,  by  the  hundred  million  Ultimate  Consumers 
themselves,  and  not  at  all  by  the  seller.  For  the  former  uphold 
at  all  times  the  commercial  system,  which  offers  its  rewards 
in  the  shape  of  profits.  Virtually  all  Consumers  believe  that 
the  seller  should  own  what  he  sells,  although  no  producer  is 
allowed  to  own  what  he  produces.  That  belief  once  fixed,  all 
which  is  described  below  follows  inevitably. 

Thus  the  Ultimate  Consumer  first  issues  to  the  seller  a  bald 
invitation  to  raise  prices.  He  does  this,  first  and  forcibly,  by 
his  advocacy  of  the  profit-making,  ownership-in-industry  system. 

He  does  this  also  by  his  sheeplike  response  to  silly  advertise- 
ments, alluring  lights,  plausible  statements  of  subsidized  sales- 
men, etc.,  as  if  these  were  sane  determinants  of  where  and 
what  to  buy,  worthy  of  an  intelligent  person's  attention. 

He  does  this  also  by  his  complete  failure  to  combine  with 
his  fellow  Ultimate  Consumers,  for  united  action  in  the  assertion 
of  their  sovereignty  over  their  own  spending-money. 

He  does  this  most  of  all  by  his  blind  and  stubborn  insistence 
upon  working  day  and  night  to  earn  a  greater  income,  while 
steadfastly  refusing  to  devote  similar  time  or  effort  to  the  equally 
important  task  of  controlling  efficiently  the  outgo  thereof. 

In  the  face  of  this  situation,  created  by  the  superior  if  subcon- 
scious power  of  the  Ultimate  Consumer,  the  seller  acts  merely 
rationally  and  naturally.  He  raises  prices  merely  because  he 
has  been  hired  to  raise  prices.  For  pay  assigned  in  the  form 
of  secret  profits  going  to  an  owning  seller,  as  contrasted  with 
known  salary  or  wages  assigned  to  a  non-owning  producer, 
amounts  to  exactly  that. 

It  is  also  true,  and  only  natural,  that  the  owning  seller  will 
raise  prices  no  higher  than  he  is  hired  to  raise  them;  because 
it  finally  appears  that  the  raising  of  prices,  which  at  first  in- 


238  MODERN  ECONOMIC  TENDENCIES 

creased  his  profits,  ultimately  no  longer  does  this.  Indeed,  any 
further  raise  decreases  them. 

The  Commercialist's  Goal. — Therefore  the  owning  seller's 
prime  question  is:  How  high  does  the  community  hire  me  to 
raise  prices.  This  question  he  can  answer  for  himself  only  by 
tentatively  and  gropingly  charging  "all  the  traffic  will  bear." 

That  is  to  say,  the  seller's  choice  is  merely  between  prices 
so  high  that  he  loses,  and  prices  so  low — although  still  far  above 
the  natural  price — that  he  also  loses  (relatively  to  his  maximum 
possible  profits).  He  has  no  choice  except  to  avoid,  as  best 
his  blind  gropings  may  permit,  both  of  these  extremes. 

But  the  modern  economic  problem  lies  concentrated  within 
the  fact  that  when  he  has  found,  if  he  can,  the  golden  mean 
where  profits  are  a  maximum,  it  is  already  sure  (as  settled  in 
advance  by  the  Consumers'  mistaken  policy)  to  be  one  which 
restricts  the  volume  of  trade  far  below  normal,  through  a  price 
far  above  the  actual  one. 

Computation  of  the  Maximum  Profits  the  Traffic  will  Bear. 
• — If  what  has  been  said  above  be  true — that  the  point  of 
maximum  profits  is  determined  by  rational,  rather  than  by 
psychological,  considerations,  then  it  must  be  possible  to  com- 
pute this  point  of  balance.  This  is  true.  This  point  of  economic 
equilibrium  is  determined  solely  by  factors  as  cold-blooded  and 
mathematical  as  is  the  law  of  gravitation.  It  is  almost  as 
accurately  computable,  and  in  equal  neglect  of  sentiment  or 
morals,  as  is  the  height  of  next  year's  tide. 

Community-Nutrition. — There  is  only  one  factor  in  the  com- 
putation regarding  which,  as  yet,  there  is  any  uncertainty,  and 
this  one  is  neither  a  psychological  nor  an  important  factor.  It 
has  no  bearing  upon  sentiment  or  morals,  and  pays  no  slightest 
regard  to  human  legislation.  This  uncertain  factor  is :  Accord- 
ing to  what  mathematical  law  is  the  energy  of  the  community 
reduced,  as  its  volume  of  nutriment  released  to  it  by  the  com- 
mercial world  decreases,  due  to  rising  profits  and  costs  of  doing 
business  ? 

It  is  true  that  we  do  not  know  this  law  with  mathematical 
exactness;  but  it  can  be  reduced  within  certain  mathematical 
limits.  Thus,  in  the  first  place,  there  can  be  no  doubt  that  it 
is  a  direct  function — that  is  to  say,  that  the  community's  energy, 
and  hence  its  purchasing-power,  decreases  directly  with  its 
degree  of  nutrition. 


ECONOMIC  EQUILIBRIUM  239 

An  Illustration.— What  is  meant  by  this  is  that  our  illus- 
trative community,  for  instance,  which  had,  under  the  natural 
factory-system,  $1000  per  month  to  be  spent  for  flour,  does  not 
fully  retain  that  purchasing-power  when  the  supply  of  flour 
has  been  cut  down,  by  the  costs  of  commercial  competition,  to 
ninety  or  eighty  barrels,  say,  instead  of  one  hundred.  The  aver- 
age citizen  is  not  so  well  fed,  and  therefore  not  so  energetic  nor 
ambitious  in  productive  enterprise,  as  before. 

In  consequence  of  this  biological  law,  as  soon  as  the  price 
of  flour  has  been  raised  above  $10  the  total  flour  consumed  is 
reduced  not  merely  in  inverse  proportion  with  the  price,  as 
computed  above,  while  the  aggregate  purchasing-power 
of  $1000  per  month  remains  unchanged,  but  more.  The 
available  sum,  originally  $1000,  decreases  while  the  price  per 
barrel  increases.  Hence  the  number  of  barrels  consumed  is 
doubly  reduced. 

But  whether  this  variation  of  the  result  (purchasing-power) 
occurs  more  or  less  rapidly  than  its  cause  (community-nutrition) 
is  not  now  known.  It  probably  varies  less  rapidly.  But,  how- 
ever this  may  be,  the  mathematical  limits  within  which  it  must 
probably  fall  are  easily  stated. 

The  Range  of  Possibility. — That  is  to  say,  while  an  even 
proportionality  between  these  two  variables  may  be  taken,  for 
the  moment,  as  the  most  probable  truth,  yet  departure  from 
this  assumption,  on  one  side  or  the  other,  could  hardly  con- 
ceivably exceed  proportionality  with  the  square  of  the  price,  in 
the  one  direction,  nor,  in  the  other  direction,  with  the  square 
root  of  the  price.  For  all  practical  purposes — particularly  in 
view  of  the  mathematical  results  cited  below — it  is  safe  to  assume 
that  such  a  range  as  this  includes  every  possible  variation. 

For  it  will  soon  appear  that  a  trespass  even  beyond  these  limits 
would  make  no  appreciable  difference  in  our  mathematical  con- 
clusions as  to  price  and  volume  of  trade  at  which  the  seller's 
income  becomes  a  maximum.  The  effect,  in  this  case,  varies 
far  less  rapidly  than  the  cause. 

The  Mathematical  Law  of  Charging  All  the  Traffic  will 
Bear. — Thus  there  are  three  assumptions  upon  which  it  is 
proper  to  enter  a  mathematical  investigation  of  this  process 
of  "charging  all  the  traffic  will  bear,"  namely: 

1.  That  community-nutrition  varies  inversely,  but  propor- 
tionately, with  the  price  of  commodities; 


240  MODERN  ECONOMIC  TENDENCIES 

• 

2.  That  it  varies  inversely  as  the  square  thereof;  and 

3.  That  it  varies  inversely  as  the  square  root  thereof. 

The  mathematical  solution  of  the  problem  as  to  where  will 
be  found  the  point  of  maximum  commercial  returns — where  the 
traffic  has  actually  been  charged  all  it  will  bear — under  each  of 
these  three  assumptions  respectively,  will  be  found  in  Note  1, 
at  the  end  of  this  book.  Here  the  reader  is  burdened  only 
with  the  results  of  the  computation,  stated  comparatively.  Thus : 

I.  Assuming  that  the  purchasing-power  varies  exactly  as  the 
nutrition  (which  itself  will  vary  inversely  with  the  retail  price), 
then  gross  profits  or  diluits  become  a  maximum  when  the  selling- 
price  is  just  twice  the  natural  cost,  or  at  a  rate  of  gross  profit 
of  just  100  per  cent. 

Under  that  condition  the  aggregate  purchasing-power  of  the 
community  (expressed  in  dollars)  will  have  fallen  to  just  one- 
half  of  normal,  and  the  average  volume  of  production  and 
consumption  per  capita,  expressed  in  commodities,  will  have 
fallen  to  just  one-quarter  of  the  biological,  factory-system 
normal ! 

II.  Assuming  that  the  purchasing-power  varies  as  the  square 
of  the  nutrition,  then  aggregate  profits  become  a  maximum  when 
the  selling-price  has  risen  only  to  50  per  cent  above  the  natural 
cost. 

The  aggregate  purchasing-power  of  the  community,  in  money, 
has  then  fallen  to  44  per  cent  of  normal,  and  the  average  volume 
of  production  and  consumption  per  capita  to  29.6  per  cent  of 
the  factory-system  normal! 

III.  Assuming  that  the  purchasing-power  varies  as  the  square 
root  of  the  nutrition — and  this  is  the  one  case,  among  the  three, 
which  is  best  supported  in  probable  truth  by  general  biological 
facts — then  profits  become  a  maximum  when  the  selling-price 
has  risen  to  200  per  cent  above  the  natural  cost! 

The  aggregate  purchasing-power,  in  money,  has  then  fallen 
to  57.7  per  cent  of  normal,  and  the  average  volume  of  com- 
modities produced  and  consumed  per  capita  has  sagged  to  19.2 
per  cent  of  the  factory-system  normal! 

Thus,  wherever  within  the  bounds  of  probability  may  lie  the 
exact  relationship  between  community-nutriment  and  purchas- 
ing-power, the  inevitable  result  of  our  appending  to  the  factory- 
system,  as  at  present,  the  unnecessary,  costly  and  parasitical 
commercial  system — as  if  it  were  the  only  system  imaginable 


ECONOMIC   EQUILIBRIUM  241 

for  financing  extensions  and  conducting  sales — must  be  in  any 
case  a  marked  depression  of  the  volume  of  trade,  with  its  re- 
sultant oppression  and  starvation  of  the  Ultimate  Consumer, 
and  its  partial  paralysis  of  employment  for  the  producer.  This 
has  now  become  true  to  a  degree  which  would  be  unbelievable, 
were  it  not  supported  both  by  general  observation  and  by  the 
above  mathematical  analysis.  The  general  fact  is  obvious;  but 
its  degree  would  not  be  guessed,  without  mathematical  proof. 

Wherever,  mathematically  speaking,  may  lie  this  obviously 
direct  relation  between  community-nutrition,  on  the  one  hand, 
and  society's  purchasing-power  as  its  result,  we  have  no  escape 
from  the  conclusion  that  its  catalytic  presence  forces  commer- 
cialism, wherever  in  our  body  economic  its  germs  may  be  at 
work,  to  enact,  by  their  exuded  poisons,  a  deficit  in  our  natural 
activity  in  production,  interchange,  consumption  and  real  em- 
ployment, on  the  average  per  capita,  by  some  major  fraction, 
ranging  from  probably  not  less  than  seventy  to  not  over  eighty- 
one  per  cent,  of  what  would  naturally  prevail  were  there  no 
commercialism  in  the  land — were  there  only  factory-system 
everywhere. 

The  reader  who  finds  these  figures  hard  to  believe,  from 
a  bare  mathematical  proof,  whereas  he  may  not  be  mathe- 
matical by  nature,  must  postpone  his  judgment  until  later 
chapters,  dealing  with  Unemployment,  etc.,  more  in  detail,  have 
been  read. 

Trade  Everywhere  Paralyzed  by  Commercialism. — This 
statement  is  a  sweeping  and  positive  one.  This  current  deficit 
of  from  seventy  to  eighty-one  per  cent  in  our  natural  volume 
of  trade  is  due  merely  to  an  artificial  increase  in  all  prices 
everywhere,  caused  merely  by  our  neglect  of  organization  where 
organization  should  exist.  It  depends  not  in  any  slightest  degree 
upon  whether  any  given  commercialist  is  getting  rich  too  fast, 
or  too  far,  or  is  getting  rich  at  all;  nor  upon  whether  he  is 
hiring  and  "exploiting"  labor  or  not.  It  depends  solely  upon 
what  he  is  doing  in  his  attempts  to  get  rich,  or  to  avoid  bank- 
ruptcy. 

It  depends  solely  upon  the  fact  that  the  hundred  million 
Ultimate  Consumers  permit  upon  their  premises,  in  the  national 
Factory- System  which  they  alone  support,  and  over  which  they 
are  in  equity  sole  Sovereign,  a  sort  of  activity  and  a  legalized 
institution,  namely,  ownership-in-industry,  which  every  actual 


242  MODERN   ECONOMIC   TENDENCIES 

capitalist-employer  or  superintendent  of  labor  in  the  land  now 
excludes  rigidly,  in  the  interests  of  efficiency,,  from  the  particular 
premises  over  which  he  happens  to  exercise  authority. 

Competition  the  Death  of  Trade. — This,  then,  is  the  scien- 
tific aspect  of  that  ancient  and  honorable  superstition,  begotten 
by  the  man-in-the-street  and  fostered  by  the  universities,  that 
"competition  is  the  life  of  trade."  The  truth  of  the  matter 
is  that  competition — using  that  term  to  cover  all  brands  of 
commercialism,  of  which  competition  is  only  one — comes  just 
as  near  to  being  the  death  of  all  trade  as  possible,  while  still 
leaving  in  it  a  spark  of  life  upon  which  to  "sponge."  The 
natural  productive  and  consumptive  life  of  the  nation  bears  up 
under  this  parasitical  burden  of  commercialism  exactly  as  a 
slave  lives  under  an  idle  master — starved  in  body,  mind  and 
morals  to  the  utmost  degree  which  will  still  leave  life  enough 
to  produce  something  upon  which  the  master  can  subsist. 

Economic  Abdication  Impossible. — The  Ultimate  Consumer 
has  had  thrust  into  his  unwilling  hands,  by  fate,  the  sovereignty 
over  this  entire  field  of  action.  If  he  is  unwilling  to  exercise 
this  sovereignty  consciously  and  intelligently,  to  guide  trade 
toward  his  own  best  interests,  he  cannot,  nevertheless,  abdicate 
his  responsibility  in  fact.  His  innate  sovereignty,  forbidden 
rational  expression,  insists  upon  working  its  sway  subcon- 
sciously, blindly,  irrationally  and  destructively,  just  the  same — 
like  a  locomotive  run  wild  without  a  driver — acting  automat- 
ically to  raise  prices  to  the  highest,  and  sagging  the  volume  of 
purchase  and  consumption  to  the  lowest,  point  which  will  still 
leave  the  seller's  profits  a  maximum. 

The  law  operates  automatically  and  relentlessly.  Assuming 
refusal  of  the  Ultimate  Consumers  to  control  it  in  the  only 
natural  way  inherent  with  them,  in  their  function  as  retail- 
purchasers,  it  is  subject  to  no  control  by  law.  The  political 
function  of  the  voter  is  no  substitute  for  his  economic  function 
and  responsibility  as  an  Ultimate  Consumer. 

Thus  the  Consumer  has  acted  on  the  wrong  plan  from  the 
start.  Then,  when  he  finds  that  it  hurts,  he  grumbles  or  riots, 
equally  ineffectively.  The  last  thing  he  will  consider  is  a 
combination  of  all  Ultimate  Consumers  for  rational,  efficient 
action. 

Finally,  when  further  purchase  becomes  financially  impossible, 
he  ceases  buying,  either  individually  or  through  boycott — a 


ECONOMIC   EQUILIBRIUM  243 

policy  which  arrests  rising  prices  only  at  a  time  when  the  arrested 
price  can  no  longer  benefit  the  Consumer,  and  which  starts  the 
rise  into  action  again  the  instant  the  Consumer  resumes  buying. 

Social  Factors  Determined  for  us  Automatically,  by 
Economic  Equilibrium. — There  are  many  features  of  modern 
life  besides  the  price  and  volume  of  retail  food-supplies  which 
are  determined  for  us  by  this  same  relentless,  subconscious  opera- 
tion of  non-sentimental  forces,  acting  in  stable  equilibrium. 
Any  list  of  the  more  prominent  sorts  of  thing  thus  controlled 
for  us  must  begin  with  those  just  mentioned,  because  these 
are  the  most  vital  ones.  That  is  to  say,  first  come  all  questions 
of  price,  whether  for  raw  material,  partially  manufactured  goods, 
jobber's  wholesale  or  Ultimate  Consumer's  retail.  Next  comes 
the  only  factor  equally  basic  with  price,  and  determined  simul- 
taneously with  it,  namely,  volume  of  trade  at  each  of  these  many 
points. 

Next  follows,  in  parallel  with  this  last,  and  of  gigantic  im- 
portance, the  current  volume  or  rate  of  issue  of  interest-bearing 
securities,  or  the  rate  of  interest  thereon.  All  this  must  be 
absorbed  currently  by  the  public,  else  society  can  enjoy  no 
circulating-medium  with  which  to  keep  its  big  enterprises  in 
motion — just  as  it  has  to  swallow  currently  the  rising  volume 
of  profits  and  costs  of  doing  business,  else  it  can  get  no  daily 
bread. 

Included  as  a  part  of  this  third  sort  must  also  be  that  rising 
aggregate  of  valuation  of  all  sorts  of  appliances,  buildings  and 
stocks  of  goods  against  which  no  formal  securities  are  commonly 
written.  The  growing  valuation  of  a  grocery-store,  for  instance, 
or  of  an  apartment-house  the  orginal  cost  of  which  has  under- 
gone no  change,  are  illustrations  of  this.  Indeed,  according  to 
Professor  Fisher's  law,  quoted  later,  this  increased  valuation 
is  a  direct  result  of,  and  is  proportional  to,  this  increased  income 
in  the  form  of  rising  retail  prices  or  rentals.1 

i  This  is  how  this  works,  as  described  by  Justice  Harry  Robitzek,  a 
New  York  City  judge  who  has  dealt  largely  with  the  tenement-eviction 
and  ' '  rent-strike ' '  cases  in  that  city,  as-  reported  in  the  Times  for 
December  3,  1919: 

"The  trouble  comes  from  two  kinds  of  operators — the  speculator 
and  the  lessee.  The  speculator  has  a  house  under  consideration  and 
finds  that  the  gross  yearly  rental  is  $10,000.  He  figures  that  the 


244  MODERN   ECONOMIC   TENDENCIES 

Quite  in  parallel  with  these  more  elementary  and  simple 
factors  of  economic  life,  such  as  prices  and  volume  of  trade, 
yet  bearing  as  directly  upon  our  daily  happiness,  are  others 
which  are  dependent  upon  these  first.  At  least,  they  are  de- 
termined by  this  same  process  of  balance  in  stable  equilibrium. 
Among  such  may  be  mentioned  the  congestion  of  population 
in  cities,  or  in  certain  occupations ;  the  depopulation  of  the  rural 
districts;  the  current  volume  of  unemployment;  the  unsatisfac- 
tory grades  of  taste  which  prevail  in  many  fields  of  work,  art 
or  recreation,  which  we  commonly,  but  erroneously,  attribute 
to  depravity  in  public  taste.  None  of  these  are  matters  of 
conscious,  willful,  social  control.  Each  is  a  product  of  sub- 
conscious, automatic,  economic  equilibrium — not  uncontrollable, 
but  controllable  only  through  a  technique  which  we  have  not 
yet  learned. 

Even  the  volume  of  crime,  in  its  broad  proportion  to  more 
wholesome  activities,  is  determined  in  this  same  way.  Burglary 
proceeds  merely  so  far  as  it  pays.  The  dirt  in  our  streets,  the 
poor  quality  of  cooking  and  worse  atmosphere  of  service  in  our 
restaurants,  the  poor  music  played  in  our  public  places  (selected 
because  it  is  supposedly  popular,  when  the  cogent  fact  is  merely 
that  the  lovers  of  good  music  have  been  disfranchised  by  com- 
mercialism), the  prevalence  of  the  vulgar  tip-system  (which 
everyone  dislikes  and  which  every  social  club  prohibits,  because 
in  a  social  club  the  preference  of  the  members  rules) — all  these 
are  instances  of  our  government  not  by  individual  preferences, 
but  by  the  unsentimental  dictates  of  a  relentless,  uncontrollable 
institution,  which  we  ourselves  have  erected  and  started  into 
motion,  but  which  we  cannot  control  nor  stop. 

value  [valuation]  is  about  six  and  one-half  times  that,  or  $65,000. 
He  buys  the  house  for  that  figure  and  immediately  raises  the  rents 
$1000  a  year.  The  next  man  comes  along  and  multiplies  $11,000 
by  six  and  one-half  and  pays  the  first  man  $71,500  for  the  house, 
and  raises  the  rents  another  $1000  a  year,  so  that  he  may  pass  the 
house  along  to  still  another  speculator. " 

This  process  looks  like  bald  robbery,  when  stated  in  this  way;  but 
it  is  exactly  the  same  process,  only  less  disguised,  which  has  been  raising 
the  valuations  of  every  sort  of  unchanging  property  during  the  last 
few  decades.  New  property  takes  its  increasing  valuations  partly  from 
increasing  costs;  but  old,  unchanging,  physically  depreciating  property 
acquires  its  rising  valuations  only  through  this  bald  process  of  charging 
all  the  traffic  will  bear. 


ECONOMIC   EQUILIBRIUM  245 

We  cannot  digress  here  from  our  topic — economics — to  prove 
these  statements  as  to  esthetic  phenomena.  But  neither  can 
we  pass  by  the  topic  of  automatic  social  equilibrium  without 
at  least  their  bare  mention.  The  connection  between  all  these 
diverse  social  phenomena  and  the  simple  balance  between  price 
or  volume  of  trade  and  dealer's  margin  is  not  an  obvious  one, 
nor  is  there  space  here  for  tracing  it  in  detail.  An  illustration 
or  two  must  suffice. 

Service  versus  Profits. — The  income  of  a  commercialist, 
whatever  may  be  its  character  in  detail,  consists  always  of  a 
margin  between  the  natural  cost  of  something  useful  to  the 
Consumer  and  the  price  exacted  for  it.  In  order  that  this 
margin  may  be  secured,  the  first  requisite  is  some  degree  of 
service  to  the  Consumer,  else  the  latter  will  not  pay  either  the 
natural  cost  or  the  margin  above  it. 

Yet,  it  must  be  noted  most  carefully,  it  is  not  this  service 
to  the  Consumer  which  brings  the  commercialist  his  income, 
and  therefore  keeps  him  at  his  post.  It  is  the  receipt  of  the 
useless  and  burdensome  margin  above  the  natural  cost  which 
alone  does  this. 

Thus,  on  the  one  hand,  a  grocer  selling  food  must  actually 
aid  in  forwarding  nutriment  toward  the  Consumer,  else  the 
Consumer  will  not  continue  to  buy.  The  president  of  a  railway- 
corporation  must  permit  his  salaried  superintendents  to  serve 
the  public  with  some  actual  transportation,  else  the  public  will 
cancel  the  road's  franchise  or  charter.  The  promoter  issuing 
interest-bearing  securities  must  supply  in  them  some  degree  of 
fluid  credit  as  a  circulating-medium  (which  is  the  sole  function 
of  these  papers  which  is  actually  useful  to  the  community), 
else  the  community  will  soon  become  unable  to  "absorb"  them 
by  paying  interest  upon  them. 

Yet  it  is  equally  plain,  on  the  other  hand — and  it  is  even 
more  important  to  note — that  the  grocer  who  merely  supplied 
nutriment  to  the  community,  yet  made  no  commercial  profit 
(beyond  his  proper  wages  as  a  producer),  or  who  diverted  none 
of  the  Consumer's  money  into  costs  of  competition  with  the 
dozen  other  grocers  who  are  duplicating  his  efforts,  must  soon 
go  out  of  business.  He  could  not  secure  his  fraction  of  the 
job  of  feeding  the  community;  and  if  all  grocers  followed  this 
policy  the  community,  if  bound  to  the  commercial  system,  would 
go  entirely  unfed. 


24G  MODERN   ECONOMIC   TENDENCIES 

Similarly,  the  railway-president  who  gave  the  community 
such  good  service  that  no  dividends  were  paid  to  the  stock- 
holders would  soon  be  discharged;  or,  if  not,  his  bankrupt 
corporation  would  soon  be  bought  up  for  a  song  by  other  com- 
mercialists,  who  appreciated  better  its  possibilities  as  an  ex- 
tractor of  tribute  from  the  public.  Likewise  the  promoter  who 
might  accomplish  merely  an  expansion  of  the  volume  of  cir- 
culating-medium— which  is  the  sole  useful  function  attached 
to  his  profession — yet  without  bringing  dividends  to  the  capital- 
ist, would  soon  cease  to  promote. 

For  in  all  commercial  fields  of  activity,  the  making  of  com- 
mercial gains  is  always  the  primary  qualification  for  tenure  of 
office.  Service  to  the  public,  even  if  usually  inseparable  from 
this,  is  nevertheless  a  consideration  quite  secondary  in  im- 
portance— unable  of  itself  to  maintain  commercial  existence  and 
authority,  if  the  primary  consideration  (profits)  be  lacking.  In- 
deed, there  are  many  instances  where  the  last  vestige  of  useful- 
ness to  the  Ultimate  Consumer  has  departed  from  the  commer- 
cial office  held;  yet  the  income  attached  thereto  continues  and 
expands,  merely  because  of  the  incumbent's  ability  to  connect 
said  office  with  some  remote  act  of  consumption  by  the  public, 
and  to  increase  the  practicable  degree  of  extortion  thereby  at- 
tached to  it.2 


2The  telephone-situation  in  New  York  City  during  the  winter  of 
1919-20  is  an  instance  of  this  divorce  of  service  and  commercialism. 
The  telephone-service,  after  the  war,  gradually  became  unspeakably  bad. 
On  several  minor  instances  the  officials  of  the  telephone-company  were 
quoted  as  admitting  this  fact,  and  by  February  11  Vice-President 
McCulloh,  of  the  New  York  Telephone  Company,  permitted  himself 
to  be  quoted  in  over  a  column  of  the  Times  to  this  same  effect. 

The  explanation  of  all  this  bad  service,  both  in  the  public  admissions 
referred  to  and  in  private  correspondence  between  the  author  and  the 
Company,  is  inability  to  secure  either  plant  or  help,  or  both.  But, 
it  is  particularly  to  be  noted,  this  difficulty  applies  equally  to  all  depart- 
ments of  the  Company's  work.  Yet  neither  the  public  nor  the  author 
has  ever  found  the  slightest  cause  for  complaint  in  the  inefficiency 
of  its  commercial  department.  The  efficiency  of  its  book-keeping  and 
billing  offices  has  been  uniformly  one  hundred  per  cent! 

The  service  itself  has  been  so  bad  that,  should  the  Company  omit 
altogether  to  send  out  bills  for  one  month  out  of  the  twelve,  it  would 
still  be  indebted  to  the  public  for  unearned  income.  If  it  should  divert 
its  every  book-keeper  and  collector  into  the  operating  department,  it 
could  not  make  the  service  what  it  should  be.  Yet  it  has  not  so 


ECONOMIC   EQUILIBRIUM  247 

These  facts  constitute  merely  another  form  of  stating  what 
was  proven  mathematically  above,  namely,  that  the  effect  of 
commercialism  is  to  annul  the  major  portion  of  the  service 
otherwise  potential  within  the  community.  These  facts  are 
inserted  here  with  emphatic  address  to  those  readers  who  share 
the  widely  prevalent  view  that  sellers  make  their  maximum 
income  when  they  best  serve  the  Consumer.  The  economic  prob- 
lem which  now  confronts  us  cannot  be  understood  in  its  most 
trivial  detail  until  the  student  grasps  the  fact  that  every  com- 
mercialist  gets  his  biggest  return  when  he  has  deliberately  driven 
away  some  three-fourths  of  his  potential  volume  of  trade. 

Moreover,  when  inquiry  is  directed  toward  the  question  which 
three-quarters  is  it  which  is  automatically  selected  for  rejection, 
and  which  one-quarter  retained,  in  this  operation  of  the  survival 
of  the  most  profitable,  it  develops  that  the  one-quarter  retained 
is  always  that  which  consents  to  accept  the  cheapest,  most  tawdry 
and  vulgar  grades  of  goods  or  service.  For  it  is  upon  low  cost, 
as  much  as  upon  high  price,  that  the  commercialist  makes  his 
profit.  He  rejects  not  merely  the  major  volume,  but  also  all 
the  better  qualities,  of  demand,  as  being  unprofitable.  We  see 
the  working  of  this  law  in  every  pore  of  our  social  life,  from 
our  literature  of  "best  sellers"  to  our  cattle-trains  loaded  with 
strap-hangers  and  Coney  Island  standards  of  entertainment. 

The  fact  that,  in  spite  of  this  law,  so  many  dealers  do  still 
actually  preserve  some  interest  in  serving  their  customers  is 
one  of  the  many  instances,  cited  all  through  this  book,  of  how 
the  innate  tendencies  of  our  wonderfully  wholesome  human 
nature  do  succeed  in  defying  the  degrading  influences  of  an 
artificial  institution,  such  as  commercialism.  But  that  fact 
should  not  blur  in  the  slightest  the  more  dominant  fact  that 
the  institution  of  profits,  as  arranged  by  the  Consumer  himself, 
hires  the  seller,  so  far  as  it  has  power,  to  have  as  little  interest 
in  serving  the  Consumer  as  the  Consumer  is  physically  able  to 
stand,  and  as  the  seller  is  psychologically  able  to  stand,  and 
to  center  all  thought  upon  the  increase  of  that  margin  which 

diverted  a  single  person.     Its  efficiency  of  billing  out  its  charges  does 
not  drop  with  its  efficiency  of  service,  but  remains  unchanged. 

Watch  the  future,  and  see  if,  as  the  crisis  gathers,  the  service  of 
every  commercial  enterprise  does  not  drop,  drop,  drop,  while  the  regularity 
of  its  collections  remains  unimpaired,  and  its  prices  rise,  rise,  rise — 
until  the  instant  of  final  dissolution. 


248  MODERN   ECONOMIC   TENDENCIES 

is  of  no  slightest  use  to  the  Consumer  who  pays  it.  Such  a 
situation  is  the  inevitable  result  of  the  relentless  law  of  the 
survival  of  the  most  profitable. 

It  is  in  this  way  that  so  many  aspects  of  our  community-life 
are  determined  for  us,  both  as  to  quantity  and  quality,  apparently 
relentlessly,  by  an  automatic  working  of  forces  which  we  do  not 
understand,  to  ends  of  which  we  do  not  approve.  All  of  these 
departments  of  the  social  problem  mentioned  above,  and  many 
a  subdivision  thereof,  are  all  controlled,  from  day  to  day,  not 
by  any  deliberate,  conscious  action  of  the  individual  human  will, 
taste  or  whim  at  all,  as  is  so  commonly  assumed,  but  by  this 
automatic  balance  between  economic  forces  and  subconscious 
biological  resistances,  acting  upon  a  plane  as  regardless  of 
human  interference  as  do  the  earthquakes  or  the  tides. 

The  Fluidity  of  Economic  Forces. — In  order  to  realize  the 
truth  of  this  we  must  remember  that  economic  results  spread 
from  economic  causes  as  oil  spreads  ever  water.  Therefore,  in 
viewing  any  given  bit  of  causative  commercialism,  or  any  given 
bit  of  resultant  depression  in  the  same  locality,  the  two  must 
not  be  expected  to  fit  into  each  other  as  mates.  When  we  erect 
a  costly  electric  sign,  or  insert  a  full-page  advertisement,  in 
New  York  City,  we  must  not  expect  to  find  the  people  who  pass 
along  Broadway  injured  thereby.  Instead,  it  is  the  Illinois 
coal-miners,  or  the  Oregon  lumbermen,  or  the  fishermen  off 
Nova  Scotia,  who  find  life  increasingly  a  burden  therefrom — 
of  course,  without  knowing  why.  Causes  and  effects  must  not 
be  looked  for  in  the  same  place,  nor  in  the  same  industry. 

That  is  why  one  must  always  be  broad  and  deep  in  arguing 
social  explanations.  The  first  rule  to  be  learned  by  the  student 
in  sociology  is  that  each  citizen,  industry,  class  or  locality  suffers 
for  the  sins  of  all,  and  all  for  each. 

The  Commercial  Brake  upon  Civilization. — It  is  not  to  be 
expected  that  the  sweeping  statements  made  above,  as  to  the 
major  degree  in  which  commercialism  paralyzes  society's  latent 
energies  and  potential  taste,  will  be  believed,  upon  first  hearing. 
For  this  huge  dissipation  of  our  economic  energies  is  now  too 
well  disguised,  amidst  facts  too  long  familiar,  to  be  easily  recog- 
nized. 

This  is  partly  due  to  its  wide,  osmotic  distribution  throughout 
every  cell  of  the  body  economic,  through  the  fluidity  of  its  actions 
and  reactions  just  noted.  It  is  partly  due  to  the  consequent 


ECONOMIC   EQUILIBRIUM  249 

difficulty  of  tracing  any  detailed  effect  from  its  corresponding 
cause.  It  is  partly  due  to  the  fact  that  we  have  never  known 
any  other  or  better  state  of  affairs.  We  have  never  yet  tried 
a  complete  national  factory-system,  in  any  country  of  the  globe, 
let  alone  an  international  one,  co-extensive  with  our  existing 
commercial  system. 

Yet  this  astounding  brake  upon  the  natural  expression  of  the 
human  will,  which  finds  its  expression,  as  to  the  volume  and 
quality  of  trade,  in  this  law  of  charging  all  the  traffic  will  bear, 
is  actually  applied  at  every  point  of  rubbing  contact  in  the 
entire  economic  organization.  There  is  not  a  shoestring,  nor 
a  cabbage,  nor  a  share  of  stock,  nor  a  concert-ticket  which  can 
get  itself  sold  and  bought,  without  its  operation.  There  is  not 
a  single  step  in  all  the  intricate  maze  of  processes  and  transfers 
through  which  all  manufactured  commodities  must  pass,  at  which 
it  does  not  exert  its  baleful  influence.  The  amount  and  quality 
of  the  food  which  we  eat,  of  the  tenement  or  villa  which  shelters 
us,  of  the  education  which  we  receive,  and  of  the  drama  which 
we  enjoy,  are  all  determined  for  us  by  the  action  of  this  auto- 
matic, eighty-per-cent-deficit  brake. 

It  is  at  work,  for  instance,  upon  the  sale  of  the  paint  which 
protects  the  lathe  which  shapes  the  wheels  of  the  locomotive 
which  transports  some  of  the  billion  of  items  entering  into 
the  cost  and  accessibility  of  each  of  these  things.  The  old  Mother 
Goose  story  of:  "Water  quench  fire!  Fire  burn  stick!  Stick 
beat  dog !  Dog  bite  pig !  Pig  get  over  stile !  Or  I  shan't  get 
home  to-night !"  is  a  child's  picture  of  modern  industry.  And 
at  each  of  these  innumerable  steps  this  reduction  of  activity  by 
some  eighty  per  cent  below  the  latent  normal,  through  mere 
commercial  impact  and  friction,  is  at  work  day,  night  and 
holidays. 

Thus  the  modern  body  economic,  which  boasts  the  "efficiency" 
of  its  commercial  system  (as  witnessed  by  the  prices  put  out 
thereby)  in  a  truly  Prussian  spirit,  maintains  its  daily  existence 
only  in  spite  of  a  continual  internal  hemorrhage,  created  by  its 
parasitical  commercial  militarism,  which  currently  drains  it  at 
every  point  of  some  four-fifths  of  its  available  energy.  In  part 
this  parasite  is  splendidly  organized,  as  militarism  always  is; 
but  in  underlying  aim  it  is  as  lawless  and  anarchic  as  militarism 
always  must  be.3 

3  The  reader  will  find  additional  support  for  the  fact  of  this  eighty 


250  MODERN   ECONOMIC   TENDENCIES 

Life  under  Adversity. — At  first  sight  it  might  seem  fan- 
tastically impossible  that  our  modern  body-economic  should  ac- 
tually be  maintaining  its  existence  under  a  continual,  parasitical 
absorption,  leakage  or  dissipation  of  some  seventy  or  eighty  per 
cent  of  its  natural  supply  of  life-supporting  energy.  Yet  such 
a  thing  is  neither  impossible  nor  improbable. 

For,  in  the  first  place,  we  have  no  obvious  100-per-cent 
standard  by  which  to  gage  our  present  condition.  We  have 
never  possessed  a  complete  factory-system.  We  have  never  known 
a  materially  richer  era  than  now,  nor  one  more  cultivated  in 
taste.  All  of  the  deficits  figuring  in  this  book  are  relative  ones, 
based  upon  the  potentialities  rightfully  ours,  in  view  of  the 
marvelous  productivities  of  existing  inventions,  when  organized 
for  use  under  a  complete  factory-system.  We  have  no  means 
for  ready  estimate  of  how  rich  our  present  appliances  and  tech- 
nical skill  might  make  us,  if  organized  upon  the  factory-system 
— except  by  some  such  a  laborious  process  of  analysis  as  this 
book. 

Secondly,  the  body-economic,  in  this  respect,  is  merely  mani- 
festing a  phenomenon  which  is  familiar  to  biologists  in  all 
branches  of  life.  Indeed,  it  is  only  as  the  reader  turns  from 
economic  to  biologic  instances  that  he  will  be  able  to  comprehend 
the  marvelous  elasticity  of  life  in  general,  which  permits  it  to 
subsist  after  a  fashion — and  to  gravitate  into  such  a  form  that 
it  is  natural  for  it  to  subsist — upon  supplies  or  opportunities 
far  below  normal  for  that  species. 

Breaking  all  the  traditions  of  treatises  upon  political  economy, 
the  reader  may  be  referred  here  to  one  of  Mrs.  Oilman's  charm- 
ing and  perspicacious  poems:  "The  Sweet  Uses  of  Adversity," 
which  tells  how  the  tall  white  birch  of  Norway,  the  pride  of 
our  landscape-gardeners  here  in  America,  in  the  arctic  regions 
becomes  a  tiny  thing  in  the  grass,  called  "Dog's  Ear" : 

"See  now  what  life  the  tree  doth  keep— 
Branchless,  three-leaved  and  tough — 
In  June  the  leaf -buds  peep,  flowers  in  July  dare  creep 
To  bloom,  the  fruit  in  August — and  then  sleep. 

per  cent  deficit  on  page  480.  There  it  is  pointed  out  that  commercialism, 
in  its  effects  upon  progress,  is  like  a  railway-brake.  The  resultant 
retardation,  measured  in  energy  dissipated,  is  far  greater  than  the 
energy  consumed  in  actuating  the  cause. 


ECONOMIC  EQUILIBRIUM  251 

Strong  is  the  tree  and  rough. 

It  lives,  and  that's  enough. 
'Dog's  Ear'  the  name  the  peasants  call  it  by — 
A  Norway  birch — and  less  than  one  inch  high!" 

The  lesson  runs  through  all  biology.  Equilibrium  with  en- 
vironment now  permits  life  to  expand  into  something  command- 
ing admiration,  now  forces  it  to  shrink  into  that  which  excites 
scorn.  But  life  in  the  face  of  adversity  does  not  easily  relinquish 
existence.  It  responds,  instead,  with  a  squaring  of  the  feet  and 
a  hardening  of  the  nerves  for  less  sensitiveness  and  greater 
resistance.  It  may  be  brutalized,  as  it  is  stunted;  but  it  is  not 
extinguished. 

Social  Erosion. — In  society's  endless  effort  at  harmonizing 
itself  with  its  environment  (in  which  environment  its  own 
legalized  internal  relationships  form  the  largest  part)  this  con- 
tinual progress  of  retardation  and  degradation  of  life,  into 
consonance  with  a  restricted  volume  of  economic  traffic  which 
has  been  charged  all  it  will  bear,  is  going  on  everywhere.  In 
every  such  a  readjustment  the  balance  is  ever  between  onward- 
pressing  life,  on  the  one  hand,  and  the  resistance  to  it  originating 
with  the  two  great  divisions  of  commercialism,  namely,  interest- 
bearing  capitalism  and  exhausting  commercial  competition,  on 
the  other — which  might  well  be  called  economic  friction  and 
impact  respectively. 

It  is  in  this  relentless,  grinding  pressure  between  the  expan- 
sive nature  of  parasitical  commercialism,  on  the  one  hand — 
expressing  its  instinct  of  self-propagation  as  insistently  as  does 
its  prototype,  the  cootie — and,  on  the  other  hand,  the  biological 
insistency  of  human  life  upon  growing,  somehow  or  other — 
which  abrades  so  many  particles  of  humanity  into  the  down- 
and-out  class,  and  precipitates  them,  as  human  dust,  into  the 
charitable  or  penal  institutions. 

It  is  in  this  balanced  equilibrium  that  is  to  be  found,  ever 
swinging  and  swaying  in  fluid  stability  between  these  two 
gigantic  opposing  forces,  the  Great  Determinant  of  all  modern 
social  phenomena,  and  with  it  the  Great  Issue  of  the  immediate 
future. 

Modern  Patriotism. — The  citizen  who  neglects  this  world- 
issue  domiciled  in  the  skyscraper  and  corner-grocery  of  to-day 
is  just  as  guilty  of  disloyalty  as  was  he  who  neglected  in  1850 


252  MODERN   ECONOMIC   TENDENCIES 

the  menacing  issue  of  slavery,  until  it  was  too  late  to  avert 
civil  war — or  as  he  who  was  blind  in  1914  to  America's  respon- 
sibility, as  a  member  of  the  world's  civilization,  for  injustice 
done  in  the  far  corners  of  Europe.  But  it  is  not  enough,  in 
the  name  of  civilization,  to  fight.  Bodily  courage  is  not  the 
highest  patriotic  quality,  after  all,  but  one  of  the  commonest; 
for  it  protects  the  life  of  the  state  only  after  it  has  been  sadly 
maimed. 

One  must  also  have  intellectual  courage  and  patriotism.  One 
must  dare  to  challenge  that  which  all  approve — which  is  not 
easy  nor  comfortable.  One  must  dare  to  examine,  analyze,  think, 
foresee — and  then  act  drastically  before  obvious  peril  to  the  com- 
munity has  made  violence  a  necessity  obvious  to  the  most  dull. 

This  much,  at  least,  the  socialist  movement,  however  erroneous 
its  philosophy  may  be,  now  dares  to  do.  That  is  why  it  is 
spreading  so  rapidly.  Does  the  man  who  despises  the  socialist 
movement  possess  the  intellectual  courage  and  patriotism  to 
set  up  in  opposition  an  adequately  incisive,  while  more  correct, 
solution  of  the  economic  problem? 

If  he  has  not,  he  must  not  grumble  if  active,  daring,  positive, 
narrow-minded  socialism,  unyielding  in  its  fanatical  courage, 
soon  dominates  his  pecuniarily  selfish  and  intellectually  cowardly 
policy  of  dawdling  laissez  faire,  or  of  panicky,  spasmodic  sup- 
pression of  radicalism  by  force.  He  must  not  be  surprised  if 
this  policy  plunges  his  country  into  a  temporarily  despotic,  cruel 
and  wasteful  rule  of  America  by  labor-unions  or  Soviets,  in  a 
socialistic  experiment  relentlessly  tried. 

To  be  content  with  jailing  or  deporting  those  who  have  become 
disaffected  by  our  great  American  government — not  that  in 
Washington,  for  that  does  not  rule,  but  that  of  commercialism, 
which  rules  every  city  and  hamlet — is  both  stupid  and  un- 
patriotic. It  is  stupid  because  it  does  not  remedy  the  evil  one 
iota.  It  is  unpatriotic  because  it  does  make  the  bitterness  worse. 

Modern  Lack  of  Liberty. — To  those  inclined  to  observe 
superficially,  this  era  seems  one  of  remarkable  civilization.  Be- 
cause it  is  intricate  and  dazzling  we  are  misled  into  believing 
it  refined  and  elevated.  Because  it  is  complex  and  frantic  we 
believe  it  energetic.  Because  it  tangles  itself  endlessly  in  com- 
mercial red  tape  of  innumerable  corporations,  multiplied  ac- 
counts and  interlocking  directorates,  we  believe  it  efficient.  Be- 
cause it  is  relentless  we  believe  it  just. 


ECONOMIC   EQUILIBRIUM  253 

But,  to  those  who  are  careful  in  forming  their  views,  it  is 
none  of  these.  Its  underlying  human  nature  is  good;  but  its 
institutions,  through  which  that  human  nature  must  find  expres- 
sion, are  abominably  crude. 

For  refinement  does  not  consist  in  electric  signs  and  jazz- 
bands.  The  most  powerful  energies  are  the  latent  and  unassum- 
ing, rather  than  the  noisy,  ones.  Efficiency  consists  in  sim- 
plicity and  directness,  and  (in  economics)  low  prices,  rather 
than  in  artificial  complexity.  And  as  to  justice,  its  first  ele- 
ment is  a  spirit  of  mercy. 

So,  if  the  author  believed  this  civilization  of  ours  to  be  free 
and  voluntary,  as  so  many  do,  he  must  also  believe  human 
nature  to  be  evil,  as  so  many  do.  But  there  seems  no  atom 
of  evidence  to  support  either  of  these  beliefs.  Our  acts  are 
not  what  we  wish  them  to  be.  Our  civilization  is  not  what 
we  wish  it  was.  But  things  will  never  be  otherwise  until  we 
alter,  not  somebody  else's  human  nature,  but  our  own  allegiance 
to  certain  inherited,  but  wrong,  institutions. 

So  long  as  we  adhere  to  our  belief  in  the  great  American 
superstition — our  belief  in  commercialism,  our  fanatical  faith 
in  the  sacred  virtue  of  selfishness  as  the  sole  motive  force  in 
life,  our  jealousy  of  the  license  of  each  citizen  to  engage  in 
economic  privateering  at  will — just  so  long  we  are  slaves.  Our 
acts  are  determined  for  us  automatically.  Our  individual  wills 
are  impotent  for  the  good  which  we  sincerely  desire. 


CHAPTER  XII 

OTHER  FEATURES  OF  INTEREST 

RETURNING  now  to  the  more  prosaic  topic  of  the  particular 
machinery  utilized  by  commercialism  for  "charging  all  the  traffic 
will  bear,"  especially  in  the  line  of  the  issue  of  interest-bearing 
securities,  the  way  in  which  the  public  pulse  is  felt,  in  order 
to  know  what  volume  of  securities  may  be  issued  with  safety, 
runs  about  as  follows.  Each  new  commercial  enterprise  usually 
issues  three  sorts  of  securities:  bonds,  preferred  stock  and  com- 
mon stock.  According  to  the  ethics  of  Wall  Street,  interest  on 
the  bonds  must  be  paid,  else  the  enterprise  is  adjudged  bankrupt. 
Interest  on  the  preferred  stock  is  not  guaranteed,  as  virtually 
it  is  upon  the  bonds;  but  it  is  stated  in  advance  that  the  rate 
of  interest  will  not  exceed  a  certain  figure,  and  it  is  understood 
that  the  first  earnings,  after  interest  on  bonds  and  other  prior 
liens  are  met,  will  be  devoted  to  paying  this  specified  rate,  if 
possible. 

After  all  these  obligations  have  been  met  out  of  earnings 
then  the  common  stock  is  to  take,  in  the  form  of  interest,  the 
leavings.  It  thus  has  the  least  guarantee  of  receiving  any  in- 
terest at  all;  but,  on  the  other  hand,  no  limit  to  its  possible 
rate  of  interest  is  stated.  This  rate,  usually  zero  at  the  start, 
or  far  below  that  of  the  preferred,  may,  if  the  enterprise  be 
sufficiently  successful,  exceed  that  of  the  preferred  stock. 

The  bonds  issued  usually  represent  approximately  the  outlay 
for  appliances  purchased  outright;  but  whether  this  be  true  or 
not  has  no  bearing  upon  the  right  or  wrong  of  interest.  This 
was  explained  in  Chapter  X.  This  outlay  is  not  often  met 
in  entirety  by  cash  by  the  new  enterprise.  Instead,  the  bonds 
are  often  accepted  by  the  concerns  furnishing  the  appliances, 
in  part  payment  therefor. 

The  Expansion  of  Financialization. — Indeed,  the  birth  and 
growth  of  this  practice,  with  its  variations,  has  so  revolutionized 

254 


OTHER   FEATURES   OF  INTEREST  255 

our  national  methods  of  organizing  industry,  during  the  last 
quarter-century,  that  a  business  man  of  1890  would  find  himself 
at  sea  to-day.  The  whole  aspect  of  our  more  prominent  engineer- 
ing houses  has  been  transformed,  to  meet  this  modern  condition, 
from  that  of  shops  or  designing-offices  pure  and  simple  into  con- 
cerns more  or  less  completely  financial  in  character  and  function. 
The  larger  ones  have  become  all  but  actual  bankers;  the  smaller 
ones  rely  upon  affiliation  with  regular  banking-houses. 

In  the  chapter  upon  Credit  it  was  shown  that  many  lines  of 
enterprise  which  are  nominally  quite  different  from  banking, 
such  as  insurance,  etc.,  are  in  reality  but  branches  of  our  ramify- 
ing and  unorganized  system  of  interest-bearing  credit,  upon 
which  we  must  rely  for  all  our  daily  activities.  Of  these  branches 
the  engineering  of  novel  technical  enterprises  has  now  become 
one  of  the  most  important. 

A  generation  ago  the  only  commercial  properties  used  as  a 
basis  for  gambling  on  'change  were  governmental  securities,  raw 
food-commodities  such  as  wheat,  corn,  cotton,  etc.,  marine  risks, 
and  railroad  and  mining  stocks.  But  since  then  Wall  Street  has 
been  invaded  by  a  horde  of  "industrials"  which  have  relegated 
these  earlier  ventures  into  secondary  importance.  To-day  a  man 
cannot  put  a  tin-can  into  the  fire,  to  melt  off  and  save  the  solder, 
that  paper-securities  representing  various  ownerships,  or  chances 
of  profit,  connected  with  the  job  are  not  listed  on  'change  by  the 
million,  and  their  daily  fluctuations  in  valuation  given  space  in 
each  morning's  journals,  or  reported  hourly  over  hundreds  of 
tickers. 

Preferred  and  Common  Stock.— The  preferred  stock,  in 
turn,  is  commonly  spoken  of  as  representing  the  cash  contributed 
for  current  operative  expenses;  but  whether  this  be  true  or  not 
has  no  bearing,  any  more  than  has  the  destination  of  the  bonds, 
upon  conclusions  as  to  the  nature  of  interest. 

Finally,  the  common  stock,  which  is  thrown  out  on  top  of  the 
bonds  and  the  preferred  stock,  is  commonly  known  in  business 
parlance  as  the  "good  hopes"  of  the  enterprise.  While  good 
businessmen  are  careful  not  to  issue  common  stock  to  such  vol- 
ume as  to  have  no  valuation  at  all,  either  by  estimate  of  the 
public  at  the  start  or  by  earnings  later,  yet  the  market-valuation 
of  the  common  stock  is  by  far  the  most  widely  open  to  conjecture 
of  the  three  forms  of  security.  Inevitably,  also,  there  is  always 
the  minority  of  less  scrupulous  promoters  who  issue  stock  so  near 


256  MODERN  ECONOMIC  TENDENCIES 

the  ragged  edge  of  nothing,  as  to  valuation,  as  to  keep  the  market 
fully  up  to,  and  constantly  aware  of,  the  limit  to  issue  apparent 
in  the  fact  that  the  consuming  public  has  already  been  charged 
all  the  traffic  will  bear. 

Gradation  of  Commercial  Risk. — The  entire  plan  is  based 
upon  a  desired  gradation  of  the  several  sorts  of  security  as  to 
risk  of  principal  and  fluidity  in  rate  of  interest.  The  bonds  rep- 
resent the  greatest  security  of  principal,  with  a  guaranteed  rate 
of  interest;  they  therefore  fluctuate  the  least  in  market- valua- 
tion. The  preferred  stock  is  a  degree  more  uncertain,  for  it  may 
receive  no  interest  at  all;  but  it  has  first  chance  (after  the 
bonds)  to  do  so.  The  common  stock  is  the  purest  gamble  of  the 
three,  and  may  attain  almost  any  market- valuation,  up  or  down, 
as  the  earnings  of  the  enterprise  wax  or  wane. 

Such  is  the  assortment  of  goods  offered  to  the  public  taste 
by  the  financier.  It  is  just  as  essential  in  finance  to  have  a  list 
graded  to  suit  all  preferences  as  it  is  in  the  grocery,  dry-goods 
or  hardware  businesses. 

There  are,  of  course,  many  other  sorts  and  gradations  of  in- 
terest-bearing securities  than  these  three ;  but  these  will  serve  to 
illustrate  the  plan  upon  which  they  are  classified  and  appraised 
in  the  commercial  world.  They  also  serve  to  show  how  the 
greater  number  of  them  owe  their  entire  valuation  neither  to  any 
original  history  of  the  securities,  nor  to  any  temporary  unpro- 
ductiveness of  the  enterprise,  but  to  a  present  earning-capacity 
which  is  absolutely  independent  of  any  peculiarities  of  source  or 
origin — an  earning  capacity  which  deperds  solely  upon  current 
ability  to  extort  high  prices  from  the  Ultimate  Consumer. 

Stock  without  Face- Value. — That  this  is  merely  a  fair 
statement  of  the  universal  state  of  affairs  in  the  commercial 
world,  and  no  unfriendly  indictment,  is  proven  by  one  fact  wfr'ch 
is  far  more  eloquent  than  any  words  which  might  be  quoted  for 
or  against  commercialism.  This  is  that  recently  there  has  en- 
tered the  practice  of  issuing  common  stock  without  any  stated 
face-value.  That  is  to  say,  instead  of  the  prospectus  stating,  as 
formerly,  that  there  would  be  so  many  shares  of,  say,  $100  par 
value  each  (which  shares  might  sell  at  only  $10  each  when  the 
enterprise  was  first  launched),  both  the  prospectus  and  the  stock- 
certificate  say  merely  so  many  "shares,"  without  assigning  to 
them  any  nominal  valuation. 

This  practice  is  an  unequivocal,  although  tacit,  admission  that 


OTHER   FEATURES  OP  INTEREST  257 

what  is  shared  is  not  any  specific  fraction  of  the  appliances  in- 
volved, for  everyone  knows  that  these  appliances  may,  and  surely 
will,  depreciate  to  ultimate  nothingness,  yet  without  any  parallel 
depreciation  of  the  valuation  of  these  shares.  Nor  is  it  any  spe- 
cific fraction  of  the  material  produce  coming  from  those  appli- 
ances ;  for  that  produce  may  be  very  great,  and  may  be  just  what 
the  community  much  needs,  yet,  if  it  be  not  sold  at  a  profit,  the 
shares  are  worthless. 

The  thing  shared  is  the  current  net  profits,  and  these  do  not 
depend  upon  any  past  history  of  the  stock-certificates,  nor  of  the 
money  or  credit  invested  in  them,  but  solely  upon  current  suc- 
cess in  selling  goods.  The  stock-certificate  brings  merely  a  share 
in  the  game  of  extorting  profits  from  the  Ultimate  Consumer. 

Thus  the  market-valuation  of  those  unlabeled  shares  is  ad- 
mittedly so  open  to  future,  conjectural  fluctuation,  resting  upon 
something  entirely  subsequent  to  the  origin  of  the  stock,  that  it 
is  not  worth  while  to  give  it  even  a  nominal  figure  in  advance. 
In  this  way  this  practice  is,  in  the  vernacular,  "a  dead  give- 
away" of  the  fact  that  interest  drawn  in  the  form  of  dividends 
upon  stock  is  purely  an  exaction  of  tribute  from  the  Ulti- 
mate Consumer,  and  therefore  is  indeterminate  beforehand  in 
amount. 

Yet  this  policy  of  issuing  unlabeled  stock  gives  every  sign  of 
having  come  to  stay.  As  yet  it  has  aroused  no  adverse  criticism, 
on  the  score  of  injustice  to  the  Ultimate  Consumer  of  the  com- 
modities made  or  traded  in  connection  with  it. 

Watered  Stock. — To-day  few  people  ever  trouble  them- 
selves to  try  to  connect  such  issues  of  common  stock  with  actual 
investments  of  cash  in  tangible  appliances.  It  has  come  to  be 
tacitly  recognized  that  such  a  question  has  no  bearing  upon  jus- 
tice to  the  investor  embodied  within  the  stock.  As  to  justice  to 
the  Ultimate  Consumer,  that  is  an  equity  as  yet  undreamed  in 
the  financial  district. 

The  doctrine  that  interest  must  be  based  upon  any  such  an  in- 
vestment, in  order  to  be  equitable,  has  now  quite  ceased  to  be 
even  a  pretense  "on  the  street,"  among  the  commercialists  them- 
selves. It  is  true  that  in  academic  discussions  of  the  nature  of 
interest,  or  for  the  repulse  of  assaults  by  would-be  reformers 
upon  some  small  bastion  of  the  commercial  fortress,  this  doc- 
trine always  bobs  up  promptly — to  serve  chiefly  as  an  obstacle  to 
rational  debate  of  the  real  issue.  But  in  the  financial  district 


258  MODERN   ECONOMIC   TENDENCIES 

itself  no  one  ever  bothers  any  longer  to  wiggle  the  legs  of  this 
scarecrow  into  semblance  of  life. 

Wall  Street  cynically  accepts  the  fact  that  the  market-valua- 
tions of  all  securities  depend  solely  upon  the  rate  of  interest 
which  they  may  succeed  in  paying,  and  not  upon  any  inherent 
value  lying  latent  within  the  securities  ever  since  their  creation, 
whether  that  creation  were  by  investment  of  cash  or  otherwise. 
Wall  Street  really,  although  not  frankly,  accepts  interest  as  what 
it  really  is,  namely,  a  pure  hold-up  of  the  Consumer.  In  the 
commercial  form  of  hold-up,  as  in  any  other,  the  profitableness 
of  the  enterprise,  and  hence  the  valuation  of  a  share  in  it,  de- 
pends solely  upon  how  much  the  victim  proves,  after  experiment, 
to  have  had  in  his  pockets. 

Appraisals  and  Rates. — The  railroad-properties  of  the  na- 
tion have  now  for  five  or  ten  years  been  undergoing  an  incon- 
ceivably slow  and  costly  appraisal  of  their  tangible  valuation. 
This  is  likely  to  occupy  ten  years  more,  and  is  sure  to  be  already 
quite  obsolete  before  it  can  be  finished.  This  appraisal  has  been 
undertaken  in  response  to  this  widespread  justification  of  divi- 
dends, by  both  college-professor  and  commercialist,  upon  the 
grounds  of  original  investment.  For,  if  this  justification  be  war- 
ranted, then  the  first  need  of  the  people  is  knowledge  as  to  this 
original  investment.1 

So  this  costly  and  impracticable  appraisal  has  been  under- 
taken by  the  government,  in  a  charmingly  childlike  oblivion  of 
the  fact  that  even  complete  knowledge  as  to  the  present  valua- 
tion of  these  properties  would  throw  not  the  slightest  light  upon 
the  amount  of  the  original  investment,  nor  upon  its  source. 
Also  in  oblivion  of  the  fact,  to  be  demonstrated  later,  that  com- 
mercial valuations  and  commercial  costs  of  replacement  always 
must  prove  to  be  in  mutual  consonance,  because  one  depends 
upon  the  other. 

Yet  we  shall  quote  later  to  show  that  both  the  academic  advo- 
cates of  commercialism,  in  their  treatises  upon  the  general  na- 
ture of  interest,  and  also  the  highest  officials  of  our  larger  rail- 
way-corporations, now  disclaim  publicly  any  connection  between 
the  dividends  paid  upon  their  securities  and  either  the  past  or  the 
present  cost  of  their  tangible  appliances.  According  to  both  these 
authorities,  the  valuation  of  securities  depends  solely  upon  the 

"Written  long  before  the  United  States  entered  the  Great  War  and 
took  control  of  the  railroads. 


OTHER   FEATURES   OF  INTEREST  259 

rate  of  interest  or  dividends  which  they  are  able  to  extort  from 
the  Consumer;  and  this,  in  turn,  is  quite  independent  of  any 
history  of  origin. 

The  Origins  of  Capitalism. — Although  it  is  insisted  here 
that  this  doctrine  is  correct,  that  neither  the  rate  of  interest  nor 
the  valuation  of  irfterest-bearin£  securities  depends  at  all  upon 
the  history  of  the  original  investment,  yet  it  is  important,  since 
others  proclaim  the  opposite,  to  inquire  as  to  the  origins  of  mod- 
ern capitalism. 

Thrift  and  Capitalism. — In  the  first  place  it  is  obvious 
that,  whatever  may  have  been  the  case  in  earlier  times,  in  recent 
decades  no  appreciable  volume  of  capitalism  can  arise  through 
the  thrifty  savings  from  productive  wages.  Modern  capitalism 
maintains  a  rate  of  growth — men  becoming  millionaires  within  a 
few  years,  and  the  nation  as  a  whole  creating  tens  of  billions  of 
new  capitalism  within  a  few  months — which  cannot  be  ap- 
proached by  the  savings  of  even  the  most  exceptional  producer. 

As  noted  above,  a  producer  who  saved  ten  thousand  dollars 
yearly  would  be  a  phenomenon.  The  author  doubts  if  any  such 
ever  existed.  Yet  the  financier  who  accumulated  capitalism  at 
the  rate  of  only  ten  thousand  per  annum  would  be  an  insignifi- 
cant piker,  quite  out  of  the  race  in  the  fields  of  high  finance ! 

According  to  the  New  York  Times,  a  conservative  sheet  up- 
holding commercialism,  Mr.  Rockefeller's  fortune  grew  by  eight 
millions  in  one  day,  presumably  while  he  played  golf.  What  can 
the  thrifty  wage-earner  do  to  keep  up  with  this  pace  ? 

Yet  if  he  fails  to  do  so  he  gets  poorer  daily.  As  noted  above, 
unless  he  happens  to  enjoy  capitalism  of  his  own  to  a  most  un- 
usual amount,  in  proportion  to  and  in  addition  to  his  wages  or 
salary,  he  cannot  even  hold  his  own  against  the  growth  of  outside 
capitalism  against  'him,  to  say  nothing  of  net  saving. 
.  Re-invested  Dividends. — In  the  second  place  it  is  obvious, 
without  necessity  for  any  display  of  statistics,  that  the  bulk  of  all 
modern  capitalism  is  re-invested  interest,  dividends,  profits  or 
surplus.  There  is  no  "intensive  farming5'  in  the  world,  putting 
back  into  the  ground,  to  seed  again,  the  bulk  of  what  it  extracts, 
which  can  compare  with  that  of  commercialism. 

Indeed,  commercialism  thereby  classifies  itself  with  a  whole 
group  of  institutions  from  past  history,  such  as  French  abso- 
lutism in  1780,  American  negro-slavery  in  1850  and  German 


260  MODERN   ECONOMIC   TENDENCIES 

militarism  in  1880,  which  cannot  help  growing.  They  feed  upon 
their  own  vitals. 

But  this  is  no  sign  of  health.  The  fact  that  "money  begets 
money"  is  no  proof  that  the  process  is  a  wholesome  one.  Capi- 
talism cannot  be  justified  in  paying  dividends,  upon  the  score  of 
its  origin,  for  a  moment  after  it  has  been  discovered  that  cap- 
italism consists  of  re-invested  dividends.  The  snake-egg  is  as 
evil  as  the  snake. 

If  dividends  be  wrong,  then  the  re-investment  of  dividends,  in 
order  to  extort  more  dividends,  is  more  wrong.  If  dividends  be 
right,  then  that  fact  must  be  made  obvious  from  some  considera- 
tion quite  other  than  the  present  origin  of  capitalism  in  re- 
invested dividends.  But  such  other  consideration  has  not  yet 
appeared. 

If  dividends  be  right,  then  reinvesting  those  dividends  multi- 
plies the  right — which  is  the  position  of  the  commercialist.  But 
if  dividends  be  wrong,  then  reinvesting  those  dividends,  and  de- 
manding additional  dividends  upon  them,  multiplies  the  wrong. 

It  is  not  merely  our  contention  that  the  latter  is  the  truth.  It 
is  that  no  sanctification  of  present  dividends  may  rest  upon  the 
mere  fact  of  past  investment.  For  the  question  still  doggedly 
remains :  What,  and  whose,  was  it  which  was  invested  ? 

Surplus. — But  even  the  process  of  re-investing  dividends 
and  profits  is  too  slow  a  method  of  getting  rich  for  modern  high 
finance.  Those  smaller  businessmen  who  have  remained  content 
merely  with  making  fair  wages  in  the  form  of  profits,  saving 
some  of  it,  and  then  re-investing,  quite  fail  to  realize  how  com- 
pletely they  are  being  "done"  by  the  larger  methods  of  finance. 
For  the  process  now  more  popular  in  the  financial  world — al- 
though not  the  quickest  and  most  popular  of  all — is  the  accumu- 
lation of  surplus. 

"Surplus"  is  properly  a  fund  accumulated  out  of  the  gross  re- 
ceipts from  the  Consumer,  after  the  payment  of  all  expenses 
(such  as  wages,  salaries,  materials,  depreciation,  insurance,  sell- 
ing-costs, etc.)  and  the  deduction  of  all  sorts  of  interest-charges, 
dividends,  profits,  etc.,  accruing  to  the  financial  end  of  the  busi- 
ness. It  is  particularly  to  be  noted  that  this  list  includes  the 
purely  commercial  items  of  interest,  rent,  dividends  and  profits, 
as  well  as  all  natural,  factory-system  costs. 

That  is  to  say,  a  surplus  is  a  surplus  only  after  the  Ultimate 
Consumer  has  first  paid  every  conceivable  natural  cost  for  the 


OTHER   FEATURES   OF  INTEREST  261 

service  rendered,  and  also  all  those  additional  commercial  costs 
of  financing  and  selling  which  are  condemned  in  this  book — and 
then,  in  the  price  paid  across  the  shop-counter,  has  given  up 
something  additional  thereto,  catted  surplus. 

In  other  words,  even  if  we  accept  completely  the  commercial- 
ists's  view  that  interest,  dividends,  profits  and  costs  of  competi- 
tion are  right — which  we  deny — nevertheless  surplus  remains  un- 
questionably money  contributed  by  the  Consumer  over  and  above 
every  conceivable  cost,  'both  natural  and  commercial,  of  the 
services  rendered. 

Therefore  this  surplus  rests  in  the  hands  of  the  dealer  not  as 
an  equitable  reward  for  something  given  to  the  Consumer  by  the 
dealer,  even  in  the  commercial  sense,  but  only  by  force  of  might 
— because  the  Consumer  would  rather  submit  to  this  robbery  in 
the  form  of  surplus  than  to  forego  all  intercourse  with  the  pro- 
ducer of  what  he  desires — or  to  combine  with  all  other  Ultimate 
Consumers  to  assert  his  rights,  as  the  only  alternative.  For  the 
Consumer  it  is  a  Hobson's  choice,  at  best,  or  a  slave's  choice  at 
worst. 

Who  Owns  the  Surplus? — It  is  to  be  noted  most  carefully 
that  the  general  policy  of  accumulating  a  surplus,  whether  in  a 
grocery,  a  peanutstand,  a  bank  or  a  railway-system,  as  a  necessary 
and  wholesome  precaution  against  fluctuation  in  events,  or  for 
the  expansion  of  facilities,  is  not  condemned  here  in  the  slight- 
est degree.  But  what  is  condemned  here,  in  unlimited  terms,  is 
the  doctrine  that  this  surplus  should  ever  legally  or  automatic- 
ally become  the  private  property  of  the  grocer,  the  peanut- 
vendor,  the  banker  or  the  railway-corporation. 

Surplus  should  unquestionably  be  accumulated.  But  after  ac- 
cumulation it  should  still  remain  the  property  of  the  Ultimate 
Consumers,  who  contributed  it  over  and  above  every  conceivable 
return  in  goods  or  service — even  if  one  admits  the  equity  of 
purely  commercial  charges. 

Surplus  the  Foundation  of  Commercialism.— This  process 
of  accumulating  surplus  in  the  name  of  the  seller  is  going  on 
continually  in  every  successful  business  in  the  land.  Every  re- 
tail store  and  apartment-house,  as  well  as  every  department-store, 
factory,  railroad  or  "holding-corporation,"  is  growing  in  pros- 
perity upon  this  plan,  quite  in  addition  to  the  other  methods  of 
accumulating  capitalism  non-productively  which  are  condemned 
herein. 


262  MODERN   ECONOMIC   TENDENCIES 

The  mere  fact  that  the  petty  dealer  may  not  be  getting  rich 
"too  rapidly,"  because  losing  so  much  as  he  makes  his  purchases 
across  other  shop-counters  than  his  own — so  that  he  fails  to  ac- 
cumulate as  rapidly  as  the  big  fellows,  and  so  loses  into  their 
hands — has  nothing  whatever  to  do  with  the  folly  and  injustice 
involved  in  his  being  allowed  to  loot  the  Consumer  of  his  sur- 
plus. The  fact  that  robbery  is  a  losing  business  for  most  robbers 
is  not  our  strongest  argument  against  robbery.  Indeed,  it  has 
no  corrective  force  at  all. 

In  defense  of  this  crime  of  transferring  the  legal  title  to  the 
surplus  from  the  Consumer  to  the  dealer,  not  a  syllable  can  be 
said  to  distinguish  it  from  the  more  familiar  species  of  rob- 
bery. Not  a  syllable  of  the  many  arguments  urged  in  defense 
of  interest,  profits,  competition,  etc.,  is  applicable  to  the  looting 
of  the  Consumer's  surplus.  The  crime  continues  merely  be- 
cause those  who  are  responsible  for  denouncing  it  are  afraid  to 
do  so. 

Yet  a  very  large  and  rapidly  increasing  portion  of  all  the  in- 
terest-payments now  being  exacted  from  the  Consumer  are  based 
upon  funds  of  capitalism  which  were  contributed  originally  by 
the  Consumer  himself,  in  the  form  of  surplus.  Virtually  all  of 
the  rest  are  based  upon  capitalism  which  was  contributed  by  the 
Consumer  more  indirectly,  in  the  form  of  earlier  payments  of 
rent,  interest,  dividends  and  profits,  now  re-invested.  And  most 
of  these  earlier  dividends,  etc.,  were  based  upon  capitalism  de- 
rived from  still  earlier  contributions  of  pure  surplus  by  the  Con- 
sumer himself. 

In  none  of  these  cases  was  there  any  actual  investment  or 
sacrifice  by  the  capitalist  himself.  He  acted  merely  as  the  un- 
authorized agent  of  the  Consumer,  living  in  comfort  while  he  re- 
invested funds  which  were  not,  in  equity,  his  own,  however  they 
might  have  been  in  law,  and  which  cost  him  no  sacrifice. 

In  the  case  of  the  surplus  this  fact  is  obvious  and  incontro- 
vertible. In  the  case  of  the  re-invested  dividends,  etc.,  it  is  less 
obvious  because  less  direct;  but  it  is  none  the  less  tru^  for  all 
that. 

These  facts  force  the  protagonist  of  interest  to  prove  the  equity 
of  the  institution  from  some  other  fact  or  argument  than  that  of 
investment.  This  other  basis,  we  shall  see,  can  nowhere  be  found. 

The  "Absorption"  of  Securities. — Still  we  have  not  yet 
considered  the  baldest  aspect  of  this  plan  of  enforcing  the  Ulti- 


OTHER   FEATURES   OF   INTEREST  263 

mate  Consumer  to  contribute  capitalism  to  the  commercialism 
This  last  aspect  consists  in  the  modern  policy  of  merely  issuing 
paper — whether  bonds,  stock-certificates  or  what — against  mere 
hopes  for  future  profits,  then  extorting  the  profits,  and  then  cir- 
culating the  paper  as  negotiable  security  for  loans,  purchases, 
etc. 

Thus  these  privately  issued  fiat-monies  have  become  real 
money.  It  is  no  exaggeration  to  say  that  this  country's  present 
vast  financial  fabric — indeed,  that  of  the  international  commer- 
cial world — has  actually  been  built  up  by  reliance  upon  a  fiat 
circulating-medium  no  more  sound  than  that ! 

It  is  because  the  menace  embodied  in  this  fact  threatens  our 
businessmen  as  direly  as  it  does  the  public,  that  this  analysis  can 
be  as  impartial  in  spirit  as  it  is.  The  whole  negotiable  value 
of  all  commercial  securities  now  depends  solely  upon  current 
profits,  rather  than  upon  past  investments.  Therefore,  the  in- 
stant that  profits  in  general  are  interrupted  this  whole  fabric 
of  negotiable  credits  may  crash  to  the  ground  overnight.  Hun- 
dreds of  billions  of  valuation  may  evaporate  within  a  day  or  so. 

But  that  remark  was  parenthetical.  Our  present  business  is 
to  trace  the  nature  of  interest. 

In  the  earlier  chapter  upon  Credit  there  were  listed  a  number 
of  local  instances  of  "get  rich  quick/'  as  they  happened  to  be 
reported  in  the  daily  press.  Some  of  them  dazed  even  such  a 
hardened  old  exploiter  as  Russell  Sage  himself.  This  statement 
of  modern  methods  of  finance,  just  given,  furnishes  their  ex- 
planation. 

This  modern  method  of  creating  purely  fiat  credits,  which 
later  become  real  money  through  the  forced  contributions  of  the 
Ultimate  Consumer,  has  a  bold  and  obvious  piracy  about  it  which 
shocks  the  reader  more  easily  than  the  older  methods  did ;  yet  it 
is  to  be  noted  that  the  robbery  of  the  Ultimate  Consumer  by  this 
method  is  little  worse,  in  aggregate,  than  by  the  earlier  method 
of  accumulating  surplus.  The  chief  difference,  indeed,  arises  in 
the  factor  of  time. 

That  is  to  say,  in  the  "surplus"  method  of  acquiring  capital- 
ism the  surplus  is  collected  from  the  Consumers  first,  and  then 
the  certificates  of  capitalism  are  issued  against  it  afterwards — 
in  the  larger  corporations  by  "slicing  a  melon";  in  the  smaller 
ones  by  various  methods.  In  the  "absorption"  method  of  acquir- 
ing capitalism,  on  the  other  hand,  the  certificates  are  issued  first, 


264  MODERN  ECONOMIC   TENDENCIES 

and  then  the  surplus  necessary  for  their  support  is  collected 
afterwards.  When  this  has  been  accomplished  the  certificates 
are  said  to  have  been  "absorbed." 

That  is  why  Russell  Sage  could  not  understand  modern  rates 
of  expansion.  In  his  day  capitalists  had  been  content  to  extort 
money  first,  and  count  it  afterwards.  The  modern  method  of  not 
merely  counting  your  chickens,  but  actually  selling  them,  before 
they  are  hatched,  he  could  not  comprehend. 

The  only  difference  between  the  two  methods  is  that  the  loot, 
in  the  latter  case,  technically  never  becomes  surplus  at  all,  being 
merely  interest — a  "fair  return,"  we  suppose — upon  capitalism 
already  printed.  It  thus  avoids,  apparently,  some  of  the  invidi- 
ous public  regard  now  becoming  attached  to  surplus. 

But  the  distinction  is  only  skin-deep.  Both  sorts  of  capi- 
talism are  sheer  loot. 

Legal  Restraints  upon  the  Expansion  of  Capitalism. — Of 
recent  years  the  law  has  always  attempted  to  enforce  some  meas- 
ures of  protection  against  the  irresponsible,  baseless  expansion 
of  capitalism ;  but  these  efforts  of  the  law  have  so  far  quite  failed 
to  prevent  the  situation  from  becoming  rapidly,  acceleratingly 
worse.  This  failure  to  protect,  it  can  easily  be  explained,  lies  in- 
herent in  the  fact  that  the  sole  aim  of  these  laws,  to  date,  has 
been  the  protection  of  the  investor,  and  not  the  protection  of  the 
public.  Protection  of  the  public  of  Ultimate  Consumers,  as 
against  the  subconscious  rapacity  of  the  investors,  has  never  even 
been  dreamed,  let  alone  accomplished. 

That  is  why  the  situation  is  now  getting  so  rapidly  and  ac- 
celeratingly worse.  The  investors  find  themselves  amply  pro- 
tected, and  so  demand  no  further  reform.  But  this  satisfac- 
tory condition  has  been  attained  not  only  while,  but  actually 
because,  the  public  of  Ultimate  Consumers  is  being  increasingly 
looted  each  year. 

That  is  one  reason  why  the  situation  is  so  menacingly  uncon- 
trollable— so  defiant  of  political  action  for  reform.  No  law  can 
protect  the  public  which  does  not  rob  the  investor  of  his  present 
license  to  collect  surplus — and  to  do  that  would  collapse  the  en- 
tire financial  fabric  immediately. 

The  Acceleration  of  Surplus-Looting  Expansion  of  Capi- 
talism.— It  is  to  be  noted,  with  what  calm,  cold-blooded,  scien- 
tific spirit  one  can  muster,  that  this  utterly  defenseless  aspect 
of  capitalism  is  rapidly  upon  the  increase.  To-day  we  have 


OTHER   FEATURES   OF   INTEREST  265 

already  reached  a  point  where  the  major  portion  of  all  capitalism 
rests  upon  a  foundation  of  equity  no  less  fantastic,  and  even 
insolent,  to  the  Ultimate  Consumer  than  this — of  extorting 
from  the  latter,  by  pure  force  of  circumstance,  tribute  in  excess 
of  every  conceivable  cost  of  service  rendered  (including  even 
commercial  costs),  then  "investing"  that  tax  in  the  commer- 
cialist's  business  and  in  the  commercialisms  name,  and  then 
finally  collecting  from  the  Consumer  and  his  posterity  endless 
tribute  thereon,  called  "interest" — brazenly  excusing  this  last 
act  on  the  score  of  the  original  "investment"  having  been  made 
at  such  "sacrifice"  by  the  capitalist! 

And  yet,  if  the  accurate,  candid  mind  finds  itself  forced  to 
style  this  act  as  simple,  unadorned  robbery,  one  is  accused  of 
seditious  radicalism !  Yet  such  is  the  true  aspect  of  that  much 
boasted  "initiative"  of  the  commercial  system.  It  is,  in  effect, 
the  initiative  of  the  pirate — for  it  took  character,  courage  and 
enterprise  to  maintain  profitable  command  of  a  pirate-ship. 

But  neither  of  these  sorts  of  initiative  are  wanted  in  civiliza- 
tion. The  real  initiative  of  modern  progress,  let  it  be  remem- 
bered, which  manifests  itself  everywhere  in  scientific  discovery, 
invention,  superintendence  of  true  production,  etc.,  is  all  re- 
warded by  salary,  wages  or  royalty,  and  has  nothing  whatever  in 
common  with  commercial  initiative. 

The  Ultimate  Consumer  the  Sole  Source  of  all  Capitalism. 
— Thus,  directly  or  indirectly,  virtually  all  modern  capitalism 
has  been  furnished  by  the  Ultimate  Consumers.  If  legal  title 
to  it  is  to  be  permitted  to  exist  at  all,  that  title  should  rest 
to-day  in  equity,  without  further  payments,  with  the  Economic 
(not  the  political)  Democracy  of  Ultimate  Consumers. 

This  question  as  to  the  rightful  ownership  of  surplus,  however 
it  may  be  overshadowed  just  now  by  the  Great  War,  is  rapidly 
becoming  a  vital  issue.  Immediately  the  war  closes  it  may  be 
expected  to  come  to  the  front. 

Cost  of  Replacement.— There  is  another  aspect  of  this  ques- 
tion of  the  relation  of  interest-rates  to  original  investment  which 
deserves  careful  scrutiny.  This  is  the  common  allegation  by 
the  commercialists — made  in  the  same  breath  with  the  protests, 
to  be  quoted  later,  that  there  is  no  connection  between  interest- 
rate  and  cost  of  property— that,  if  the  property  had  to  be  re- 
placed, it  would  cost  such  a  sum  that  the  dividend-rate  thereon 
would  be  only  equitable.  Such  an  allegation,  for  instance,  has 


266  MODERN   ECONOMIC   TENDENCIES 

appeared  within  a  few  days  in  the  official  bulletins  in  the  New 
York  surface-cars,  as  to  the  rental-rates  of  certain  leases.  It 
is  also  a  stock-argument  in  the  mouths  of  all  the  corporation- 
lawyers  who  plead  before  public-service  commissions  for  higher 
rates  for  their  clients. 

But  this  argument,  while  it  is  based  upon  the  indubitable  fact 
of  a  plain  parallelism  between  principal-valuations  and  interest- 
charges,  yet  puts  the  cart  exactly  before  the  horse.  For  it  is 
the  interest-charge  which  creates  and  justifies  the  principal- 
valuation,  and  not  the  valuation  which  justifies  the  interest- 
charge.  Costs  of  duplication,  upon  the  average,  depend  upon 
the  market-valuation  of  the  securities,  and  not  the  valuation 
of  the  securities  upon  the  cost  of  duplication. 

That  is  to  say,  one  of  the  major  elements  in  the  cost  of  all 
commodities  and  appliances  (and  hence  in  the  prevailing  scale 
of  wages)  is  the  volume  and  interest-rate  of  the  burden  of 
securities  carried  by  the  community. 

Now  commejcialism  is  one  of  the  most  fluid  forms  of  energy 
known.  The  continual  selection  of  one  investment  or  another 
by  those  engaged  in  trading  securities,  and  the  interminable 
intricacy  with  which  every  commodity  mingles  itself  and  its 
price  into  the  body  and  price  of  every  other  commodity,  make 
it  one  of  the  fundamental  laws  of  commercialism  that  the  burden 
of  interest-bearing  securities  tends  always  to  le  the  same  in 
all  general  lines  of  production. 

It  is  never  quite  the  same,  it  is  true;  but  as  soon  as  it  gets 
out  in  any  one  line  there  is  always  pressure  to  bring  it  back. 
As  rapidly  as  the  commercialists  can  buy  and  sell  they  promote 
equilibrium.  There  tend  to  be  as  many  negative  departures 
from  this  equilibrium  as  positive  ones. 

Therefore  the  prices  of  all  commodities  and  appliances,  upon 
the  average,  depend  primarily  upon  the  country's  average  burden 
of  interest-charges  and  costs  of  competition — and  these  two, 
it  has  been  seen,  are  themselves  always  mutually  balanced.  The 
principal-valuation  of  the  securities,  both  as  to  price  and  as  to 
aggregate  volume  for  the  land,  also  depends,  we  have  seen,  upon 
the  aggregate  interest  or  dividend  charges  currently  paid  by 
the  community. 

Therefore  the  costs  of  replacement  and  the  valuations  of 
securities,  as  quantities  ever  balanced  against  each  other  in 
stable  equilibrium,  are  together  balanced  against  the  interest 


OTHER   FEATURES  OF  INTEREST  267 

and  dividend  charges  which  create  them.  These  three  quantities 
sway  up  and  down  together,  always  interlocked — as  an  excellent 
record  of  the  contending  forces  put  forth  by  the  Ultimate  Con- 
sumers on  one  side  and  the  commercialists  on  the  other,  but 
as  no  record  at  all  of  whether  those  valuations  have  been  justified 
by  earlier  investment  in  appliances  or  not. 

Costs  of  replacement  and  interest  or  dividend  charges  can  no 
more  get  away  from  each  other  than  the  tidal  seawater  of  an 
estuary  can  get  away  from  the  fresh  water  which  it  lacks  up 
into  the  river.  As  they  surge  back  and  forth  they  must  surge 
together. 

To  replace  industrial  properties  to-day  would  cost  many  times 
their  original  cost,  because  the  aggregate  interest-charges  of 
the  land  to-day  are  many  times  what  they  were  a  generation 
ago.  Because  of  those  greater  interest-charges  prices  are  higher, 
proportionally  thereto.  Therefore  the  interest-charges  must  al- 
ways automatically  remain  "reasonable"  in  proportion  with  the 
valuations  and  the  present  cost  of  replacement. 

Watered  Stock. — Thus  all  visible  "water,"  in  the  sense  of 
a  disparity  between  capitalization,  cost  of  replacement  and 
dividend-rates,  is  automatically  eliminated  currently  from  all 
commercial  properties.  This  beautiful  balance  can  be  pointed 
out  with  pride  by  every  philanthropic  business-office  in  the 
land!  But  the  fact  has  no  slightest  bearing  upon  the  equity 
or  inequity  of  interest. 

Censored  Publicity. — While  there  is  unanimous  agreement 
on  the  part  of  the  commercialists  to  hang  on  to  the  surplus, 
yet  there  exists  great  diversity  of  opinion  as  to  how  far  the 
policy  should  be  publicly  avowed,  or  how  it  should  appear  in 
the  published  book-keeping.  Ordinarily  it  is  carefully  cloaked; 
but  occasionally  some  corporation-official  becomes  indiscreetly 
frank,  and  the  truth  comes  out  before  his  colleagues  can  hurry 
to  seize  the  hook. 

Thus  for  some  years  now  the  railroads,  quite  oblivious  as  to 
whither  the  doctrine  was  leading  them,  or  how  it  might  be 
quoted  against  them  in  the  future,  have  been  openly  urging, 
through  the  sworn  statements  of  their  high  officials  before  public 
commissions,  through  the  editorials  of  prominent  railway-jour- 
nals and  through  their  retained  "publicity-counsel,"  the  doctrine 
that  the  valuation  of  a  commercial  enterprise  depends  not  at 


268  MODERN   ECONOMIC   TENDENCIES 

all  upon  its  cost,  but  solely  upon  its  "earning"  (that  is  to  say, 
its  taxing)  power. 

But  any  such  a  doctrine  as  that  upsets  every  commercial 
and  academic  theory  of  the  nature  and  equity  of  interest  ever 
advanced.  It  leaves  solid  foundation  for  only  one  practical 
explanation,  and  that  is  the  "hold-up-the-public"  one.  Occa- 
sionally there  steps  into  the  limelight  an  official  whose  able  mind 
and  honest  nature  forces  him  to  recognize  this  fact. 

Commercial  Authorities  under  Oath. — For  official  light  upon 
the  process  of  accumulation  of  surplus,  reference  may  be  had 
to  testimony  before  the  Interstate  Commerce  Commission — not 
because  the  railroads  are  worse  sinners  in  this  line  than  are 
others,  but  because  they  are  forced  to  debate  this  matter  in 
public  with  a  frankness  not  compelled  from  other  corporations; 
yet  with  a  frankness,  withal,  which  plainly  lacks  much  of  going 
to  the  root  of  the  matter.  The  Commission  probes  with  an 
interested  and  commendable  diligence,  but  it  is  plainly  hampered 
by  a  Supreme  Court  decision  that  the  roads  are  entitled  to 
"earn  a  reasonable  return"  upon  their  "capital";  and  also  by 
the  wide  popular  acceptance  of  the  idea  that  a  seller  may  do 
what  he  pleases  with  the  money  paid  to  him  across  the  counter — 
a  standard  of  ethics  on  the  part  of  the  Consumer  which  seems 
an  exact  parallel  with  the  honor  of  the  gangster,  which  compels 
him,  even  when  wounded  unto  death,  to  uphold  to  the  last  the 
divine  right  of  every  man  to  go  armed  and  to  settle  his  scores 
against  others  by  his  own  might  or  cunning. 

The  Commission  is  plainly  at  every  point  searching  for  some 
rational,  equitable  basis  or  principle  underlying  the  making  of 
railroad-rates,  which  may  serve  it  as  a  guide;  but  it  finds  noth- 
ing but  an  intricate  mass  of  evasions  and  irrelevancies — except 
for  one  frank  avowal  of  the  right  to  "charge  what  the  traffic 
will  bear" — coupled  with  a  universal  assumption  that,  because 
there  must  naturally  be  a  surplus,  that  surplus  is  necessarily 
the  property  of  the  road,  and  is  properly  the  basis  for  further 
exaction  of  such  interest-rates  as  will  "attract"  those  investors 
who  are  scrambling  over  each  other  in  their  frantic  eagerness  to 
find  opportunities  for  investment. 

Thus  testifies  Mr.  Park,  vice-president  and  general  manager 
of  the  Illinois  Central  Eailroad  :2 

3  These  quotations  are  from  the  same  source  as  referred  to  in  Chapter 
X,  namely,  Document  725,  61st  Congress,  3rd  Session,  recording  a  hearing 
before  the  Interstate  Commerce  Commission. 


OTHER   FEATURES   OF   INTEREST  269 

Question:  "You  think,  then,  there  ought  to  be  sufficient 
money  collected  from  the  public  to  pay  operating  expenses, 
fixed  charges  [interest  on  bonds],  7%  upon  the  stock,  and 
to  provide  a  surplus  over  and  above  what  should  be  paid  out 
of  the  surplus.  Now  what  should  be  paid  out  of  the  surplus. 

Answer:  "That  which  adds  to  the  stability  and  solidity  of 
the  property,  and  perhaps  not  to  the  earning  power." 

Q.  "You  mean  betterments  and  additions  to  the  property?" 

A.  "Yes;  a  certain  class  of  betterments  that  do  not  add  to 
the  earning  power."  .  .  . 

Q.  "If  there  was  to  be  a  return  upon  the  total  cost  of 
the  road,  and  this  $7,600,000  was  collected  from  the  public 
and  invested  in  the  stations  you  refer  to,  that  the  public 
authorities,  in  making  the  rates  in  the  future,  should  allow 
a  return  to  the  stock-holders  on  that  $7,600,000 ;  is  that  your 
proposition  ?" 

A.  "I  think  that  would  be  fair;  yes." 

[But  if  the  investment  does  not  add  to  the  earning-power,  why 
should  such  payments  be  "fair,"  even  from  the  standpoint  of 
the  commercialist  ?  The  entire  attitude  of  the  roads  as  to  rates 
is  one  of  incoherence.] 

Q.  "What  do  you  mean  by  an  investment  not  being  attrac- 
tive unless  there  is  a  surplus?" 

A.  "Well,  if  I,  as  an  individual,  can  get  12  or  15%  out 
of  some  business,  or  18  or  20%  out  of  a  bank,  and  only 
4  or  5  or  6%  out  of  a  railroad,  taking  into  consideration  the 
risk,  I  think  probably  I  would  invest  in  the  merchandise 
business  or  manufacturing  or  the  bank,  rather  than  in  the 
railroad." 

Mr.  Blauvelt,  Comptroller  for  the  Illinois  Central,  testified 
as  to  the  "value" — he  was  careful  never  to  say  "cost" — of  the 
"additions  and  betterments"  made  since  the  road  was  originally 
built  at  an  apparent  cost  of  nineteen  millions.  But  of  the 
$258,000,000  thus  spent  during  the  fifty-four  years,  at  an  average 
rate  of  about  five  millions  per  year,  only  $29,000,000  had  been 
appropriated  for  this  purpose  during  the  last  nine  years.  Ac- 
cording to  Mr.  Blauvelt: 

"You  understand  a  railroad  company  will  not  infrequently 
spend  millions  of  dollars  of  its  current  money  and  run  into 


270  MODERN   ECONOMIC   TENDENCIES 

debt  and  then  issue  bonds.  How  can  you  tell  whether  the 
money  used  for  additions  and  betterments  is  spent  from  stock 
or  bonds  or  from  income?" 

Among  the  other  roads  added  to  the  original  Illinois  Central 
of  1856  was  the  Dubuque  &  Sioux  City,  its  nearly  twelve  millions 
of  stock  being  purchased  by  means  of  an  issue  of  seven  millions 
of  I.  C.  R.  R.  stock.  Commissioner  Clemens  asked  if  a  "reason- 
able" rate  should  include  dividends  on  both  the  seven  millions 
of  Illinois  Central  and  the  twelve  millions  of  Dubuque  &  Sioux 
City  stock.  Mr.  Blauvelt  is  not  quite  conclusive  in  his  answers: 

"If  you  should  take  them  separately,  I  should  think  the 
D.  &  S.  C.  would  be  entitled  to  earn  a  return  on  the  cost 
of  that  property.  If  eleven  millions  was  invested  in  that 
property  it  should  be  entitled  to  earn  a  return  on  that.  .  .  . 
That  is,  assuming  the  I.  C.  Co.  issued  seven  millions  of  stock 
to  purchase  at  eleven  millions.  If  the  I.  C.  Co.  received  a 
return  upon  the  amount  invested  there,  and  did  not  receive 
any  net  earnings,  then  I  should  think  you  would  eliminate 
the  returns." 

Clear,  isn't  it?  But  both  issues  of  stock  are  held  by  the 
same  corporation  and  represent  a  single  investment.  Note  also 
the  tacit  assumption  that  the  mere  fact  of  a  paper  investment, 
without  any  regard  to  whether  that  investment  ever  did  any 
good  to  the  Consumer,  is  considered  the  sole  basis  requisite  for 
charging  dividends  "rightfully."  Note  also  the  light  and  grace- 
ful way  in  which  the  volume  of  interest-bearing  securities  is 
inflated  by  four  or  five  millions,  in  the  mere  act  of  transfer  of 
title,  is  passed  over  without  comment. 

But  Mr.  Blauvelt's  superior  officer,  Mr.  Park,  leaves  no  doubts 
in  the  air  in  his  testimony  as  to  what  he  regards  as  "reasonable" 
rates : 

"There  are  a  great  many  elements  that  enter  into  the 
proposition  of  a  reasonable  rate.  One  of  them  is  the  com- 
parison of  the  cost  of  transportation  with  other  forms  of 
transportation;  another  is  the  value  of  the  service  to  the 
shipper,  and  a  number  of  other  elements,  probably  the  pre- 
serving of  the  business  equilibrium." 

[But  this  is  merely  stating  one  method  of  "charging  all  the 
traffic  will  bear,"  or  all  that  can  be  charged  and  collected  in 
the  face  of  competition.] 


OTHER   FEATURES   OF   INTEREST  271 

Q.  "What  does  the  value  of  the  service  to  the  shipper 
mean?" 

A.  "That  which  would  enable  him  to  earn  a  fair  profit  on 
the  business  he  was  conducting/' 

Commissioner  Lane:  "The  Supreme  Court  has  said  that 
you  cannot  base  rates  on  the  profit  which  the  shipper  makes." 

A.  "Well,  it  would  seem  to  me  it  should  be  a  consideration. 
There  are  a  great  many  elements  entering  into  that.  I  do 
not  know  as  I  could  explain  or  define  all  of  them.  As  I  have 
said,  it  is  a  complex  and  perplexing  problem.  ...  I  have  no 
definite  or  well  defined  ideas  as  to  that." 

And  the  reason  is  that,  the  railroads'  prime  guide  in  determining 
rates  having  been  torn  from  them,  academically  at  least,  by  the 
decision  of  the  Supreme  Court,  nothing  in  the  way  of  a  guiding 
principle  is  left  to  them. 

Later  (Vol.  I,  pp.  598-600)  Mr.  Park  commits  himself  again 
to  the  proposition  that  moneys  taken  from  current  income  for 
betterments  not  visibly  adding  to  the  earning  power  should  be 
capitalized  as  a  part  of  the  value  of  the  property;  "and  when 
so  capitalized"  he  would  "exact  dividends  or  interest  upon  that 
capitalization/'  But  the  admission  comes  only  after  an  indirect- 
ness of  speech  which  warrants  inference  of  an  uncertainty  in 
making  it. 

Q.  "I  was  speaking  of  that  portion  of  your  surplus  that 
you  did  devote  to  just  such  structures  as  you  were  illustrating 
with  your  hundred-thousand-dollar  depot.  I  understand  you 
to  say  that  that  sort  of  investment  or  application  of  the  money 
was  proper  to  be  made  out  of  this  surplus  from  current 
income.  Didn't  you  say  that,  Mr.  Park  ?" 

A.  "Yes,  sir." 

Q.  "And  when  you  did  invest  any  portion  of  that  surplus, 
whether  it  was  one  ...  or  two  or  three  of  the  seven  millions, 
in  those  permanent  betterments,  they  .  .  .  become  a  proper 
basis  for  further  capitalization,  do  they  not?" 

A.  "They  would;  yes,  sir." 

Q.  "And  when  they  are  capitalized,  then  the  result  world 
be  that  the  capital  would  be  entitled  to  its  returns  in  the 
way  of  dividends  and  interest,  just  like  any  other,  would 
it  not?" 

A.  "Yes,  sir." 

The  matter  was  taken  up  at  length  by  counsel  for  the  rail- 
road, in  re-direct,  but  with  no  difference  in  result,  except  to  bring 


272  MODERN    ECONOMIC    TENDENCIES 

out  the  fact  that  the  surplus  had  not  actually  been  capitalized, 
in  the  sense  of  an  issue  of  bonds  or  stock  against  it,  but  that 
it  stood  merely  as  value  of  road — which  is  of  course  the  same 
thing  in  effect,  so  far  as  rates  are  concerned.  Counsel  argues 
that  no  road  can  borrow  all  needed  for  improvements — that  no 
business  can  do  that — but  that  some  betterments  must  come  out 
of  current  surplus.  But  that  is  not  the  question.  The  question 
is:  Who  owns  the  betterments  after  such  expenditure  has  been 
made  ? 

Official  Data. — Statistics  submitted  by  the  road  itself  showed 
that  during  the  ten  years  from  1898  to  1907,  inclusive,  over 
twenty-nine  out  of  nearly  thirty-five  millions  of  surplus  had 
been  expended  for  "additions  and  betterments."  Previously  to 
1898  this  surplus  had  ranged  from  virtually  zero  to  half  a 
million  annually. 

But  in  1898  entered  everywhere  the  era  of  modern  high 
finance.  The  surplus  of  this  particular  road  increased  in  a 
single  year  over  tenfold,  and  during  the  following  decade  in- 
creased to  three  times  even  that. 

Then  came  the  inevitable  reaction.  During  the  next  three 
years  the  surplus  all  but  disappeared,  no  betterments  were  under- 
taken, and  the  "estimated  deferred  work"  rose  from  nothing 
to  almost  four  millions  per  annum.  "  But  during  these  same 
three  years  the  "fixed  charges"  (bond-interest  chiefly)  and 
dividends  not  only  remained  undiminished,  but  actually  in- 
creased! 

These  figures  are  presented  by  the  railroad  as  the  chosen 
spokesman  for  the  other  roads,  and  must  be  taken  as  fairly 
typical  of  all  the  better  managed  railroads  of  the  land.  The 
fact  just  italicized  must  stand  as  statistical  support  of  the  state- 
ment, which  will  be  urged  elsewhere  herein  with  emphasis :  That 
under  the  commercial  form  of  organization  returns  to  capital 
must  be  given  precedence  over  service  to  the  people. 

The  superintendent  who  handled  a  road  so  that  it  gave  ever 
so  perfect  service,  yet  paid  no  dividends,  would  lose  his  job. 
The  same  sword  hangs  over  the  president.  In  this  case  at 
hand,  the  lack  of  traffic  due  to  the  panic  was  beyond  the  control 
of  the  road;  but  it  should  certainly,  in  any  sort  of  equity  to 
the  men  and  the  public,  have  cut  off  dividends  first  and  left  the 
surplus  untouched. 

The  same  policy  is  stated  even  more  clearly  by  Vice-president 


OTHER   FEATURES   OF  INTEREST  273 

Gardner,  of  the  Chicago  &  Northwestern,  who  was  also  Presi- 
dent of  the  Chicago,  St.  Paul,  Minneapolis  &  Omaha : 

"Kegulation  by  the  Commission  does  not  control  the  com- 
mercial conditions  under  which  we  get  money,  and  unless 
we  soon  may  get  higher  rates,  we  will,  in  the  future,  have 
to  run  out  the  red  flag.  We  must  be  allowed  a  satisfactory 
cash  surplus  above  everything  each  year  as  a  barometer  of 
our  surety  for  credit." 

Q.  "Would  you  still  say  you  should  have  a  right  to  secure 
that  yearly  surplus  if  you  knew  your  road  had,  in  ten  years, 
paid  on  eighty-five  millions  of  stock  dividends  amounting 
to  fifty-six  millions  and  had  in  addition  an  unappropriated 
surplus,  taken  from  earnings,  of  thirty  millions  more;  an 
amount  of  net  return  to  the  stockholders  of  more  than  the 
capital  stock f  (Italics  mine.) 

A.  "Yes,  I  would.  I  consider  its  need  only  from  the  stand- 
point of  keeping  up  credit." 

Q.  "And  in  the  face  of  the  showing  I  mentioned,  you  think 
that  also  is  required  for  maintenance  of  credit?" 

A.  "I  do." 

Q.  "What  would  you  do  with  this  yearly  surplus?" 

A.  "I  would  put  it  back  into  the  property.  It  is  due  either 
to  high  rates  or  to  economical  management,  and  belongs  to 
the  stockholders.  Unless  it  is  put  into  dividends,  as  their 
direct  cash  return,  I  think  it  ought  to  be  put  by  the  manage- 
ment into  their  property,  so  it  still  will  go  back  to  them." 

Q.  "And  if  it  were  put  back  into  the  property  you  would 
expect  it  to  earn  its  share  of  dividend,  as  any  other  part 
of  the  investment,  wouldn't  you  ?" 

A.  "Yes,  I  would." 

Q.  "I  understand  broadly  from  your  testimony  that  you 
think  the  C.  &  NW.,  if  it  is  to  prosper  in  the  future,  will 
have  to  have  its  rates  increased?" 

A.  "That  is  what  I  am  endeavoring  to  affirm.  ...  We 
must  have  sufficient  income  to  have  a  surplus  each  year." 

Q.  "You  make  that  statement  with  knowledge  of  the  sur- 
plus you  now  have  on  hand  and  have  laid  aside  during  the 
last  ten  or  twenty  years,  which,  I  believe,  is  reported  to  the 
Commission  as  thirty  millions?" 

"A  "Yes." 

Commissioner  Clark.  "The  thirty  millions  has  been  spent  ?" 


274  MODERN   ECONOMIC   TENDENCIES 

A.  "Yes;  it  has  been,  out  of  surplus  income  and  gone  to 
profit  and  loss." 

Mr.  Lyon.  "I  wanted  to  know  if  you  made  this  statement 
with  the  knowledge  before  you  that  on  an  average  capitaliza- 
tion of  $85,000,000  during  the  last  ten  years,  this  railroad 
had  paid  out  $56,000,000  in  dividends  and  had,  as  I  under- 
stood it,  $30,000,000  additional  making  the  $86,000,000— 

A.  "Yes;  and  that  money  has  gone  back  into  the  property 
and  not  been  capitalized  by  issuing  bonds  or  stock  certificates. 
That  is  just  what  serves  to  maintain  our  credit  and  enables 
us  to  borrow  at  4%." 

Q.  "As  I  understood  you,  you  would  not  care  to  express 
an  opinion  as  to  what  should  be  done  with  this  surplus  money 
that  is  gathered  in  over  what  might  be  termed  a  reasonable 
rate?" 

A.  "Oh,  yes;  I  said  that  it  should  be  put  back  into  the 
property." 

Q.  "Should  it  be  the  basis  of  rates  for  the  future?" 

A.  "If  valuation  is  an  element  in  rate-making,  yes." 

Q.  "A  great  many  railroad  men  contend  that  value  has  no 
relation  to  that  subject,  and  I  was  asking  you  if  you  collected 
$100,000,000  above  the  reasonable  rate  in  the  next  ten  years, 
and  it  is  put  back  into  the  property,  should  the  people  pay 
a  rate  on  that  hundred  millions?" 

A.  "Well,  my  answer  will  be  qualified  by  the  amount.  If 
you  had,  said  twenty-five  or  thirty  millions  in  ten  years  I 
should  say  yes.  I  do  not  think  we  should  have  an  extravagant 
surplus.  ...  It  should  be  large  enough  as  an  insurance 
against  the  loss  of  crops  for  two  or  three  years,  or  a  calamity, 
or  something  of  that  sort.  .  .  .  The  surplus  does  belong  to 
the  stockholders.  .  .  .  It  represents  a  renwnerative  rate  as 
well  as  efficient  administration."  (Italics  mine.) 

Commercial  Standards  of  Efficiency. — So  this  is  what  con- 
stitutes "efficient  administration"  in  the  commercial  field !  We 
now  have  it  frankly  from  official  source.  The  fact,  so  simple 
and  plain  in  our  imaginary  factory  permeated  with  ownership- 
in-industry,  namely,  that  enterprise  and  efficiency  in  those  who 
abandoned  bench  and  machine  for  ownership  or  negotiation 
consists  crassly  in  unlimited  nerve  in  bestriding  production,  like 
an  Old  Man  of  the  Sea  on  Sindbad's  back — transferring  money 
from  Consumer  to  bargainer  without  a  ghost  of  a  return — 
commonly  becomes  beclouded  amidst  all  the  intricacies  of  the 


OTHER   FEATURES   OF   INTEREST  275 

huge  modern  corporation.  But  here  we  have  its  true  essence 
clearly  revealed. 

But  the  very  question  under  debate  by  the  public  to-day  is: 
Does  the  surplus  belong  to  the  stockholders? 

If  the  surplus  be  due  to  high  rates,,  then  it  certainly  belongs 
to  the  public;  for  high  rates  are  a  disgrace  to  those  who  de- 
termine them,  and  a  credit  to  those  who  pay  them.  If  the 
surplus  be  due  to  an  efficiently  operated  road,  then  some  of  it 
belongs  to  the  wage-or-salary  people  who  operate  the  road.  But 
not  one  cent  of  it  can  ever  honestly  go  to  the  commercial  officials 
or  the  stockholders. 

The  very  willingness  of  Mr.  Gardner  to  have  the  matter  hinge 
upon  the  amount  stolen  from  the  shipper,  in  the  form  of  surplus, 
shows  both  the  muddiness  of  thought  and  the  vague  conscious- 
ness of  inequity  somewhere  which  pervades  most  administrators 
of  large  properties.  But  amount  has  nothing  to  do  with  equity. 
If  a  hundred  millions  is  wrong,  one  dollar  is  wrong. 

Nor  has  the  accumulation  of  a  surplus  against  disaster  any- 
thing to  do  with  charging  the  public  interest  thereon.  Certainly 
a  liberal  surplus  should  always  be  on  hand.  Certainly  it  should 
belong  to  the  public,  and  not  a  cent  of  interest  thereon  appear 
in  the  rates. 

Official  Views  as  to  Railroad-Rates. — But,  since  railroad- 
rates  are  the  best  public  expression  of  views  as  to  the  nature 
of  interest  coming  from  commercialists  of  high  authority,  it 
is  well  to  complete  the  statements  of  the  latter  as  to  their 
attitude.  The  position  taken  by  Mr.  Ripley,  then  President 
of  the  Santa  Fe  road,  is  as  follows : 

Q.  "Why  were  the  rates  raised?" 

A.  "They  have  not  been  raised.  An  attempt  was  made 
to  raise  them,  for  two  reasons — one  was  that  they  were  too 
low  per  se  .  .  .  but  perhaps  the  most  potent  reason  was  that 
we  needed  the  money." 

Q.  "Why  were  they  too  low  per  sef 

A.  "Because  the  commodity  rates  .  .  .  had  been  forced  by 
various  causes  ...  to  a  point  which  was  unreasonable  from 
the  standpoint  of  the  value  of  the  service  to  the  shipper,  and 
unreasonable  also  from  the  standpoint  of  return  to  the  car- 
rier. .  .  .  These  rates  were  the  result  of  the  competition  of 
commodity  with  commodity,  the  competition  of  locality  with 
locality,  and  more  than  all,  the  competition  ...  by  the  ship- 


276  MODERN   ECONOMIC  TENDENCIES 

pers  themselves.     The  railroads  have  always  been  absolutely 
helpless  as  against  the  shippers/' 

This  "per  se"  argument  is  merely  a  frank  avowal  of  the  policy 
of  charging  all  the  traffic  will  bear.  Mr.  Kipley's  words  merely 
mean  that  the  road  discovered  that  the  shippers  had  more  money 
in  their  pockets  than  the  roads  thought  they  had. 

[Mr.  Eipley's  position  is  that  the  road  ought  not  to  have  to 
sell  its  bonds  below  par:] 

"It  is  very  important,  I  think,  that  railroad  credit  should 
be  maintained  in  order  to  afford  opportunities  for  invest- 
ment." (Italics  mine)  .  .  .  "First  and  foremost,  there  never 
was  any  letter  definition  of  a  reasonable  rate  than  .  .  .  'what 
the  traffic  will  bear.'  That  does  not  mean  all  that  can  be 
extorted  or  squeezed  out  of  it,  but  what  the  traffic  will  bear 
having  regard  to  the  freest  movement  of  commodities,  the 
least  possible  burden  on  the  producer  and  on  the  consumer. 
The  middleman  can  take  care  of  himself." 

Q.  "How  much  importance  should  ...  be  given  to  the 
factor  of  capitalization  or  the  value  of  property  in  determin- 
ing the  reasonableness  or  unreasonableness  of  a  rate?" 

A.  "I  think  that  is  one  of  the  factors,  of  course,  and  a 
very  important  one.  So  long  as  the  railroads  ...  are  owned 
by  private  individuals,  so  long  their  return  has  got  to  be 
both  safe  and  attractive.  .  .  .  The  maker  of  the  rate  in  the 
first  instance  must  make  the  rate  such  as  to  permit  the  freest 
intercourse  and  the  freest  interchange  of  commodities,  regard- 
less of  capital,  regardless  of  cost — almost  regardless  of  cost, 
but  entirely  regardless  of  capital.  .  .  .  When  it  comes  to 
limiting  rates  by  law,  it  is  another  proposition.  Then  you 
have  got  to  consider  cost,  interest  on  capital,  and  everything 
else.  ...  In  dealing  with  these  complex  commercial  proposi- 
tions the  maker  of  the  rate  must  discard  to  a  very  large 
extent  the  question  of  the  return  on  capital,  because  he  has 
got  to  make  a  vast  number  of  rates  which  he  knows  that,  of 
and  by  themselves,  are  unprofitable,  and  a  vast  number  of 
rates  that,  applied  to  any  considerable  portion  of  his  business, 
would  bankrupt  him." 

It  is  obvious  from  this  that  Mr.  Eipley  refers  here  only  to  a 
small  minority  of  all  his  rates.  No  sane  person  expects  a 
railroad-president  to  testify  that  his  average  rate  is  made  such 


OTHER   FEATURES   OF  INTEREST  277 

that  the  road's  aggregate  return  is  "almost  regardless  of  cost" 
and  "entirely  regardless  of  capital."  All  that  he  means  is  that, 
for  the  purposes  of  commercial  competition,  or  warfare,  rates 
must  be  wielded  as  weapons,  here  and  there,  regardless  in  any 
one  particular  rate  of  the  considerations  mentioned.  It  is  un- 
fortunate that  he  was  not  examined  further  in  this  respect. 

Q.  "Do  I  understand  you  .  .  .  that  different  rules  should 
govern  the  ratemaker  for  a  railroad  than  should  govern  the 
Interstate  Commerce  Commission  when  they  try  to  fix  a  rate 
or  pass  upon  the  reasonableness  of  a  rate?" 

A.  "Not  in  the  least." 

Q.  "You  think  the  same  rules  should  govern  each?" 

A.  "Absolutely.  ...  I  think  they  should  consider  the  value 
of  the  service  first,  and  leave  the  question  of  the  cost  and 
the  valuation  of  the  properties  to  altogether  secondary  con- 
sideration." 

Q.  "You  are  speaking  now  of  the  value  of  the  service  to 
the  shipper,  as  distinguished  from  the  value  of  the  service 
as  a  concrete  fact?" 

A.  "I  am.  .  .  .  What  is  the  value  of  the  service  we  are 
rendering  to  the  shipper?  Incidentally  that  value  has  neces- 
sarily been  enhanced  by  increased  expenses  and  increased 
wages,  by  increased  valuation,  by  incomplete  and  inadequate 
returns  upon  capital.  These  are  all  factors,  but  the  prime 
factor  is  what  is  it  worth  to  the  shipper/'  (Italics  mine.) 

Yet  this  is  the  basis  for  rates  which  the  Supreme  Court 
plainly  ruled  out — appreciating,  with  an  acumen  not  enjoyed 
by  the  roads,  that  its  retention  would  lead  not  only  immediately 
to  injustices  to  the  shipper  of  the  grossest  sort,  but  ultimately 
to  an  undermining  of  the  railroad's  entire  claim  to  what  it  now 
regards  as  its  property.  In  his  last  paragraph,  as  in  his  earlier 
specific  statement,  President  Ripley  has  revealed  squarely  the 
fact  that  the  sole  basis  for  railroad-rates  is  "charging  all  the 
traffic  will  bear,"  to  a  suppression  of  traffic  far  below  its  natural 
maximum. 

The  whole  weight  of  this  treatise  is  to  be  thrown  into  counter- 
balance against  this  general  position  that  the  surplus  belongs 
to  the  commercialist,  and  that  rates  should  be  the  maximum 
which  the  Consumer  will  consent  to  pay.  The  sole  consideration 
in  industry,  in  making  rates,  should  be  the  natural,  factory- 
system  cost.  If  then  it  is  believed  that  some  one  industry,  such 


278  MODERN   ECONOMIC   TENDENCIES 

as  education  for  instance,  ought  to  be  encouraged  at  the  expense 
of  other  industries,  this  should  be  accomplished  by  a  frank 
transfer  of  money,  as  a  subsidy,  rather  than  by  endowing,  or  by 
charging  either  more  or  less  than  the  natural  cost  of  the  service, 
according  to  some  mysterious  set  of  rules  having  nothing  to  do 
with  the  equities. 

Mr.  Ripley's  position  as  to  the  original  question  of  this  dis- 
cussion, whether  it  is  right  to  charge  the  shipper  interest  upon 
a  surplus  which  has  been  created  from  his  own  current  pay- 
ments, is  revealed  thus: 

Q.  "Therefore,  if  any  carrier  in  the  past  has  collected  more 
than  what  would  be  termed  a  reasonable  return  upon  the 
investment,  and  he  re-invested  those  unreasonable  returns  in 
the  property,  would  you  expect  the  company  to  earn  a  dividend 
from  those  investments?" 

A.  "I  do  not  think  there  is  any  such  instance  on  record. 
I  do  not  know  of  anything  of  that  kind." 

Yet  on  page  121  President  Ripley  says: 


"In  14%  years  there  has  been  paid  in  bond-interest  $134,- 
000,000;  dividends,  $112,000,000;  fuel-reserve  [sinking-fund 
for  coal-properties],  $2,500,000;  discount  on  bonds  [sold  be- 
low par],  $8,750,000;  additions  and  betterments,  $30,300,000; 
remainder  $24,250,000,  which  stands  on  our  books  as  a  sur- 
plus but  which  is  not  a  cash  surplus,  being  all  invested  in  the 
property/'  (Italics  mine.) 

Therefore  his  statement  that  he  knew  of  no  such  an  instance 
must  have  been  based  upon  some  technical  objection  to  the  form 
of  the  question,  since  his  own  road  follows  that  practice. 

Again  (page  117)  he  expresses  the  opinion  that  depreciation 
should  be  made  good  out  of  operating  expenses,  but  that  im- 
provements should  be  paid  for  by  issue  of  securities.  But  we 
have  already  seen  that  physical  depreciation  of  an  appliance  on 
the  cost  of  which  securities  have  once  been  issued,  should,  in 
equity,  appear  in  a  corresponding  depreciation  of  those  securi- 
ties. Wherefore,  if  the  depreciation  is  made  good  out  of  earn- 
ings, some  increasing  fraction  of  those  securities  represents,  not 
the  original  appliance,  but  the  earnings  expended  in  keeping 
them  up.  As  Mr.  Blauvelt  states  so  plainly,  it  makes  no  dif- 


OTHER   FEATURES   OF   INTEREST  279 

ference  just  what  particular  source  of  the  road's  wealth  goes 
to  any  particular  destination;  the  public  pays  for  the  whole 
thing  in  any  event. 

Commercial  " Costs." — In  evidence  of  the  usual  complete 
disregard  even  of  such  distinctions  as  Mr.  Park  tried  to  define — 
as  to  betterments  which  did  or  did  not  increase  the  earning 
power — Mr.  Ripley's  testimony  as  to  the  Kansas  City  Union 
Depot  may  be  cited,  to  show  that  securities  bearing  interest  are 
issued  wherever  and  whenever  the  public  can  be  persuaded  to 
absorb  them,  with  no  regard  to  the  character  of  their  nominal 
basis.  For  (he  stated)  thirty  millions  of  bonds  were  issued 
against  the  Union  Depot  mentioned,  whereas  the  structure  itself 
cost  only  three  millions;  while,  according  to  Mr.  Ripley,  its 
practical  equivalent  could  have  been  built  for  perhaps  $100,000, 
or  at  most,  $200,000— one  thirtieth  of  that  sum! 

If  the  Kansas  City  Union  Depot  had  been  permitted  to  cost 
only  $100,000  then  the  railroad-capitalists  would  have  been  able 
to  collect  interest  from  the  Ultimate  Consumer  upon  only  that 
sum.  But  since  the  depot  was  made  to  cost  three  millions, 
the  capitalists  then  enjoyed  interest  upon  that  larger  sum,  thirty 
times  as  great.  That's  easy! 

What  difference  does  the  cost  make  to  the  capitalist?  For 
both  the  first  cost  and  the  interest  thereon  are  paid  by  the 
public. 

The  capitalist  never  invests  real  money,  in  the  sense  of  wages 
received  for  past  production.  He  supplies  nothing  but  the  nerve 
requisite  for  collecting  credit  from  the  Ultimate  Consumer,  and 
then  invests  that.  He  pays  those  who  build  his  railways  and 
other  plant,  in  effect,  with  artificial,  privately  issued  paper- 
money  (credit-securities  printed  by  private  authority,  and  ac- 
cepted by  the  banks  as  collateral  for  the  loan  of  real  money) 
the  valuation  of  which  securities  has  been  imparted  to  them 
solely  by  the  public's  demonstrated  ability  to  pay  six  per  cent 
thereon,  under  duress  of  taxation  without  representation,  sneak- 
ing under  the  disguise  of  high  rates  or  prices  which  are  sworn 
to  be  "reasonable." 

The  True  Equities  of  Commercial  Ownership. — If  all  this 
be  so,  then  the  act  of  passing  a  dollar  across  a  shop-counter  or 
ticket-shelf  can  no  longer  be  regarded  as  an  act  of  free  contract, 
nor  the  seller  as  an  agent  irresponsible  to  the  Consumer.  If 
the  part  of  this  dollar  which  goes  to  form  surplus  still  rightfully 


280  MODERN   ECONOMIC   TENDENCIES 

belongs  to  the  Consumer,  because  he  got  no  service  for  it,  then 
any  other  portion  of  it  for  which  he  may  receive  no  service 
belongs  to  him. 

This  criterion  applies  directly  to  all  interest  and  dividends, 
which  go  to  the  stockholders;  also  to  all  costs  of  competition, 
which  net  nobody  anything.  The  Consumer's  rights  plainly 
follow  his  dollar  into  the  till,  and  beyond,  until  he  has  had  a 
public  accounting  of  its  expenditure  to  the  last  cent.  Given 
once  this  relentless  criterion  of  service  rendered  in  return,  as 
measured  by  the  factory-system,  and  the  title  to  every  dollar 
of  commercial  property  is  thrown  wide  open  for  argument. 

The  True  Origin  of  All  Capitalism. — For,  as  repeatedly 
explained  above,  it  is  the  Ultimate  Consumer  who  alone  furnishes 
all  the  wages  and  salaries  paid  by  the  capitalist-employer,  who 
buys  all  the  raw  materials  used,  and  who  pays  all  the  rent, 
interest,  dividends  and  profits.  Now  it  becomes  plain  that  it  is 
also  the  Ultimate  Consumer  alone  who  accumulates  for  the 
capitalist  his  surplus,  which  the  latter  re-invests  under  his  own 
name — and  who  "absorbs"  (or  gives  valuation-in-exchange  to) 
all  the  paper  securities  with  which  the  capitalist  may  elect  to 
burden  any  enterprise — by  his  payment  of  tribute  thereon  in 
the  form  of  interest  and  dividends.  Hence  the  reader  must  now 
be  ready  for  the  crowning  statement  of  modern  economics, 
namely,  that  it  is  the  Ultimate  Consumer  alone  who  furnishes 
all  the  capitalism  of  the  commercial  world! 

In  interpreting  this  statement  it  must  not  be  forgotten  that 
the  capitalists  are  human,  and  are  therefore  themselves  Ultimate 
Consumers.  What  is  said  here  is  that  it  is  only  in  their  function 
of  Consumers  that  they  supply  any  capitalism,  and  not  in  their 
function  of  capitalists. 

Or  again,  that  while,  in  their  function  as  commercialists, 
they  have  been  acquiring  inequitable  title  to  all  this  commercial 
property,  they  have  simultaneously  abandoned  and  lost  what 
seems  to  the  author  an  inconceivably  more  valuable  equity, 
namely,  their  title,  in  their  function  of  Ultimate  Consumer,  to 
their  proper  interest  in  every  other  commercial  property  in  the 
land  than  their  own!  (See  page  730.) 

That  is  to  say,  in  their  commercial,  as  contrasted  with  their 
consuming,  acts,  our  commercialists  are  pan-German,  annexa- 
tionist  Prussians  of  the  most  efficient  type;  for  every  existing 
dollar's  worth  of  paper-title  to  commercial  property  in  railroads, 


OTHER   FEATURES   OF   INTEREST  281 

mills,  factories,  warehouses,  dwellings,  department-stores  and 
petty  retail  shops  alike,  has  all  been  built  up,  as  the  decades 
passed,  by  this  gradual  but  forcible  annexation  of  the  Ultimate 
Consumer's  surplus — the  surplus  over  all  natural,  actual  or  even 
commercial  return  in  commodities  or  service — in  the  name  of 
and  as  the  property  of  the  seller. 

The  Principles  Underlying  Price-making. — The  crucial  ques- 
tion already  up  before  the  Interstate  Commerce  Commission,4 
and  soon  to  monopolize  public  attention,  is :  What  is  the  guiding 
principle  of  equity  under  which  railroad-rates  and  all  other  prices 
are  determined?  But  as  to  this  question  the  student  will  get  no 
clarifying  reply  from  either  the  professional  teachers  of 
economics  nor  from  the  leading  commercialists.  The  best  from 
both  sources  which  the  author  has  been  able  to  discover  has 
been  quoted  in  this  chapter,  and  in  the  earlier  chapter  upon 
Credit. 

The  cross-examination  of  the  commercialists  before  the  Com- 
merce Commission  did  not  net  any  useful  idea,  not  because 
the  lawyers  did  not  perceive  vaguely  that  the  stockholders  could 
not  hold  equitable  title  to  the  surplus,  but  because  they  were 
afraid  to  accept,  or  afraid  that  the  court  would  perceive,  the 
conclusions  unavoidable  from  any  such  a  position,  namely,  that 
the  title  to  all  commercial  property  was  thrown  into  doubt  the 
instant  any  such  a  question  of  equity  as  that  were  urged  home. 

It  is  merely  because  we  are  afraid  of  this  horn  of  the  dilemma 
that  commercialism  is  now  being  permitted  to  walk  away  with 
our  purses,  bodies,  souls  and  civilization,  possibly  to  drop  them 
all  finally  into  the  seething  pit  of  world-revolution.  Fear  is  the 
eternal  breeder  of  trouble. 

The  student  will  nowhere  find  any  arbitrary  rule,  nor  any 
statement  of  natural  law,  for  the  determination  of  prices,  which 
can  permanently  withstand  cross-examination,  until  he  accepts 
the  rule  of  crass  tribute-by-force  which  has  been  stated  here. 
This  is  that  the  commercialist  always  charges  far  above  the 
natural,  factory-system  cost,  elevating  his  price  persistently  until 
the  traffic  has  been  charged,  not  all  which  the  traffic  itself  will 
bear — because  the  instant  the  commercialist  takes  hold  the  traffic 
is  depressed  far  below  normal — but  all  which  the  commercialisms 

4  Written  before  we  entered  the  World  War,  and  therefore  some  three 
years  before  President  Wilson  instituted  his  campaign  of  1919  against  the 
high  cost  of  living. 


282  MODERN   ECONOMIC   TENDENCIES 

profits  will  bear.  The  rule,  to  be  frank  and  scientifically  correct, 
should  read :  Charge  all  which  the  profits  will  bear. 

Any  insistence  by  the  student  upon  a  foundation  for  rates 
or  prices  based  upon  equity  causes  the  whole  structure  of  com- 
mercialistic  philosophy  to  fall  to  the  ground  in  a  tangle  of 
inconsistencies.  The  only  consistent  statement  from  the  side 
of  the  commercialists  appears  in  Mr.  Ripley's  frank  admission 
that  the  real  grounds  for  the  railroads'  demands  for  higher  rates 
were  that  they  "needed  the  money!"  Also  that,  if  they  did  not 
get  the  money  with  which  to  pay  fancy  dividends  upon  surplus 
belonging  in  equity  to  the  shipper,  the  opportunities  for  invest- 
nent  in  Wall  Street  would  be  curtailed — a  catastrophe  the  im- 
minence of  which  appals  the  general  run  of  American  people 
about  as  direly  as  would  the  prospect  of  a  collapse  of  Prussian 
junkerism. 

Passive  and  Active  Capitalism. — Interest-bearing  capitalism, 
in  its  pure  form,  rests  solely  upon  the  passive  ownership  of 
appliances  needed  by  others.  But  much  which  is  nominally 
interest  is  paid  on  capitalism  which  is  not  pure  nor  passive. 
In  many  cases  the  rate  of  interest-return  depends  much  more 
upon  the  active  promotion  of  the  enterprise  by  the  chief  in- 
vestors than  it  does  upon  mere  passive  ownership.  To  that 
degree,  therefore,  the  capitalism  should  be  classed  as  an  active 
one. 

In  active  capitalism  the  passive  ownership  is  mingled  with 
active  promotion.  Sometimes  this  intermingling  occurs  within 
the  individual.  Sometimes,  as  is  usually  the  case  with  corpora- 
tions, the  active  promotion  is  carried  on  by  individuals  other 
than  the  passive  investors,  and  its  reward  is  distributed  in  the 
form  of  salaries  or  commissions. 

Speaking  accurately,  activity  in  promotion  begets  entropits, 
and  not  salary  nor  interest.  But  since  the  two  functions  are 
often  found  merged,  in  actual  business-life,  the  rewards  being 
lumped  under  the  term  dividends,  it  is  sometimes  necessary  to 
recognize  the  latter  term  as  loosely  including  both. 

Risk  is  another  element  in  the  apparent  rate  of  interest  or 
dividends  which  operates  in  the  same  way,  to  develop  a  rate 
higher  than  that  earned  by  mere  passive,  safe  investment.  But 
since  the  risk  is  itself  a  result  of  commercial  combat  on  the 
part  of  others,  just  as  promotion  consists  of  commercial  combat 


OTHER   FEATURES   OF   INTEREST  283 

on  the  part  of  the  investor  himself,  no  broad  distinction  need 
be  drawn  here. 

Purely  passive  investment,  earning  pure  interest,  is  in 
economics  what  the  leech,  the  air-plant  or  the  non-malignant 
tumor  is  in  biology — a  parasitical  burden,  a  source  of  deficit 
and  debility,  but  not  an  active,  malicious  enemy  of  life.  Active 
capitalism,  on  the  other  hand,  earning  dividends  or  profits,  is 
in  economics  what  the  lion,  the  locust  or  the  virulent  microbe 
is  in  biology — an  invading  enemy,  which  will  kill  if  it  be  not 
killed. 

In  active  capitalism  the  "owner"  may  use  the  surplus  at 
his  command  either  to  purchase  directly,  or  as  an  indirect  aid 
to  secure  by  his  own  exertion,  control  of  the  processes  of  inter- 
change. He  may  do  this  in  a  thousand  apparently  different 
ways,  but  all  are  of  the  same  essence.  He  may  "buy  out  a 
business,"  not  merely  in  the  sense  of  acquiring  its  tangible 
appliances,  but  chiefly  in  securing  its  established  channels  of 
trade,  or  its  "good  will" — its  organization  of  salesmen,  its  mail- 
ing-lists, its  clientele  of  regular  customers,  etc.  Or  he  may  use 
his  money  to  build  up  the  selling-organization  of  a  new  business 
created  by  some  invention,  or  started  on  nothing  at  all — prose- 
cuted against  that  antagonism  which  is  always  evinced  toward 
any  intruder  into  the  commercial  world,  by  those  well  estab- 
lished, no  matter  how  valuable  to  society  that  new  business 
may  be. 

Or  he  may  observe  some  field  of  interchange  to  be  less  com- 
pactly crowded  than  usual  with  contending  aspirants  for  the 
privilege  of  conducting  trade;  which  means  that  he  sees  only 
nine  such  competitors,  say,  stepping  on  each  other  to  do  what 
one  alone  could  do  far  better  and  more  cheaply  for  the  Con- 
sumer, were  he  freed  from  economic  combat  with  the  rest  of 
them — and  that  he  judges  that  a  tenth  fighter  might  stand  some 
chance  of  securing  a  dribble  of  the  whole.  He  may  do  this 
upon  the  scale  of  a  corner-grocery,  or  a  news-stand,  or  a  sugar- 
refinery,  or  a  railway-system,  or  a  bank.  He  may  act,  in  con- 
nection with  it,  as  a  small  proprietor,  himself  doing  much  of 
the  work,  or  as  a  hundred-thousand-a-year  president,  or  as  a 
commercial  traveler,  or  as  a  promoter,  or  a  stock-broker,  or  a 
jobber  of  dry  goods,  or  as  a  newsboy  fighting  with  his  mates  for 
his  share  of  the  sidewalk. 

These  are  all  instances  of  unfactorylike  lack  of  law,  order 


284  MODERN   ECONOMIC   TENDENCIES 

and  discipline,  ruining  the  efficiency  of  supply,  where  any  busi- 
nessman— once  given  by  society  full  authority  over  the  whole 
field,  but  on  a  salary,  and  sworn  to  a  chastity  against  private 
profits  as  any  judge  is  sworn — would  promptly  substitute  factory- 
methods  of  non-owning  monoply  and  would  exclude  all  pos- 
sibility of  private  investment.  The  author  challenges  any  busi- 
nessman to  deny  that,  if  he  were  employed  upon  an  adequate 
salary  to  conduct  all  the  trade  of  the  land  in  his  own  line, 
protected  in  an  absolute  monopoly,  yet  not  allowed  to  make 
profits — freed  from  the  worries  of  competition,  enjoying  sup- 
plies brought  to  him  in  the  same  efficient  manner,  and  employing 
labor  fed  in  the  same  equitable  way — he  would  not  prefer  it 
personally,  would  not  be  able  to  give  cheaper,  better  standardized 
service  than  now,  and  would  not  find  opportunity  and  motive 
for  more  rapid  progress  than  now. 

Professor  Fisher's  Theory  of  Interest. — The  foregoing  deals 
with  theories  of  interest  which  are  more  or  less  those  of  the 
man-in-the-street,  although  they  often  crop  out  in  university- 
circles.  Attention  should  now  be  turned  to  the  more  technical 
theories  of  the  professional  economists. 

The  only  one  of  these  to  be  debated  here  is  that  of  Professor 
Irving  Fisher,  of  Yale.  This  is  because  Fisher's  book,  "The 
Eate  of  Interest"  (1907),  reviews  all  earlier  theories  and  then 
builds  upon  them.  Fisher  selects  as  his  foundation  Bohm- 
Bawerk's  theory,  as  published  in  the  latter's  "Capital  and  Inter- 
est" (1890)  and  "Kecent  Literature  on  Interest"  (1903),  because 
"it  has  become  widely  accepted."  For  the  same  reason,  and 
because  they  represent  a  most  careful  sifting  of  all  earlier 
theories,  Fisheras  views  must  be  accepted  as  the  best  attainable 
summary  of  the  professional  commercial  theories  of  interest. 

Professor  Fisher  says  (page  53)  : 

"Bohm-Bawerk's  theory  finds  the  essence  of  the  rate  of 
interest  in  the  agio  or  premium  on  present  goods  when  ex- 
changed for  future  goods.  This  theory  is  in  the  main  accepted 
by  the  writer  as  the  natural  and  proper  starting-point  for  any 
rational  discussion  of  the  subject." 

And  the  opening  lines  of  his  book  read : 

"If  the  theory  to  be  presented  in  this  book  be  correct,  the 
rate  of  interest  in  any  community  is  an  index  of  the  preference, 


OTHER   FEATURES   OF   INTEREST  285 

in  that  community,  for  a  dollar  of  present  over  a  dollar  of 
future  income." 

This  theory,  while  elaborated  and  repeated  throughout  the  book, 
is  nowhere  more  directly  stated  than  in  these  quotations. 

Attack  upon  the  Fisher  theory,  therefore,  is  not  alone  to  be 
directed  against  its  conclusions,  but  against  its  premises.  For 
this  mere  preference  on  the  part  of  the  borrower  for  present 
rather  than  future  money  is  but  a  superficial  fact,  and  not  a 
"proper  starting-point"  at  all.  It  is  superficial  in  that  it  applies 
not  to  society  as  a  whole,  but  to  the  borrowers  only.  It  is  super- 
ficial in  that  it  fails  to  recognize  the  borrower  as  the  mere 
agent — and  the  unauthorized  agent — of  the  Consumer,  charging 
against  the  latter  every  dollar  of  interest  paid  (with  a  margin 
added)  and  collecting  it  across  the  shop-counter  without  the 
Consumer's  knowledge  or  valid  consent. 

It  is  most  superficial  of  all,  too,  in  its  failure  to  recognize 
that  the  bulk  of  all  modern  interest-bearing  debts  are  contracted 
not  at  all  by  the  borrower,  but  by  the  lender.  It  is  not  the 
Ultimate  Consumers,  who  are  the  only  ones  who  pay  interest — 
and  who  are  therefore  the  only  ones  who  really  do  all  the 
borrowing  done — but  the  capitalists,  who  insist  zealously  upon 
the  privilege  of  lending  credit  and  drawing  interest  thereon. 
Their  highly  paid  agents  argue  earnestly  before  every  public 
commission  in  favor  of  ever  widening  the  existing  "opportunities 
for  investment."  Every  bank  is  an  active  agency  for  communica- 
tion with  investing  individuals,  and  the  distribution  to  them  of 
these  opportunities  for  investment.  Every  drummer  and  ad- 
vertisement is,  in  effect,  foisted  upon  the  people  for  the  ultimate 
purpose  of  increasing  the  people's  burden  of  interest-bearing 
"investments." 

The  capitalists  everywhere  insist  upon  lending,  and  will  not 
consent  to  be  paid  off  and  depart.  Every  maturing  security  is 
always  refunded  in  larger  amount.  It  is  those  corporations 
which  carry  the  largest  interest-bearing  debt  which  amass  the 
largest  fortunes.  There  is  not  the  slightest  evidence  anywhere 
in  the  commercial  world  that  the  capitalist  prefers  present  to 
future  payments,  in  the  sense  urged  by  Professor  Fisher.  If 
he  did,  the  continual  maturing  of  these  debts  must  be  steadily 
decreasing  their  aggregate  volume.  But  the  facts  are  exactly 
the  opposite  from  this. 


286  MODERN  ECONOMIC  TENDENCIES 

All  of  the  theories  of  interest  which  partake  of  these  premises 
of  Professor  Fisher  are  even  more  broadly  superficial,  in  that 
they  close  their  eyes  deliberately  to  any  comparison  of  the 
interest-bearing  plan  with  the  non-interest-bearing,  or  factory- 
system,  plan  which  everywhere  stares  us  in  the  face.  Fisher 
assumes  crassly  that  there  is  no  other  way  for  capital  to  be  made 
available  than  by  an  interest-bearing  bargain  between  a  capi- 
talist-owner of  that  capital  and  a  borrower. 

But  certainly  our  universities  owe  us  a  more  full  and  frank 
debate  of  alternatives  than  this.  Since  the  largest  current 
volume  of  loans,  and  those  most  effective  for  the  good  of  society, 
are  the  non-interest-bearing  requisitions  of  our  vast  factory- 
system,  they  should  at  least  receive  consideration  beside  the 
interest-bearing  loans  of  the  financial  field.  Since  the  universi- 
ties are  themselves  organized  upon  the  factory-system — main- 
taining a  huge  plant  and  pay-roll,  and  performing  a  most  im- 
portant public  supply,  yet  quite  without  profits,  interest, 
dividends,  drummers,  etc.,  extending  credit  to  their  own  em- 
ployees in  large  sums,  in  the  form  of  buildings,  laboratories  and 
instruments  entrusted  to  their  use,  without  interest-charges — 
this  omission  from  their  discussion  of  the  nature  of  interest  is 
doubly  bad  taste. 

Yet,  in  a  book  which  is  accredited  with  having  codified  and 
condensed  all  the  theories  of  interest,  and  with  having  skimmed 
therefrom  the  cream  of  the  truth,  by  one  of  our  most  prominent 
university-authorities  upon  economics,  there  is  no  mention  at 
all  of  this  vast  portion  of  our  credit-system  which  pays  no 
interest. 

Fisher's  theory  is  now  enjoying  great  vogue  among  commer- 
cially orthodox  (and  that  usually  means  university)  circles,  for 
the  same  reason  that  Malthus  doctrine  of  "diminishing  returns" 
and  "surplus  population"  did  a  century  ago,  namely,  because 
of  its  support  of  the  special  privileges  of  the  rich  in  a  self- 
righteousness  which  very  much  needed  to  be  bolstered.  But  the 
Malthusian  doctrine  has  now  become  completely  discredited,  as 
being  a  half-truth  only,  without  shattering  those  special 
privileges.  Indeed,  they  have  grown  in  the  interim.  Wherefore 
a  competent  refutation  of  the  Fisher  theory  of  interest  must 
not  be  expected  to  abolish  interest. 

Who  Loans,  and  Who  Pays  Interest?— It  is  bootless  to 
reply  to  the  above  that  every  appliance  in  the  factory  bears 


OTHER  FEATURES  OF  INTEREST  287 

interest-charges,  and  that  the  university  lives  upon  these  charges 
collected  from  other  factories  than  itself.  We  know  too  well 
the  truth  of  this.  But,  in  the  first  place,  if  a  university  operates 
well  without  interest-charges  against  its  patrons,  why  will  not 
every  other  factory  ?  Or,  if  the  other  factories  are  warranted  in 
charging  interest  because  they  must  support  the  university,  then 
why  does  not  the  university  get  all  of  their  collections  of 
interest  ? 

The  commercial  enterprises  outside  pay  the  universities  the 
interest  upon  their  endowments  only  by  deliberately  charging 
the  Consumer  more  than  the  natural  cost  for  what  is  supplied, 
passing  over  to  the  universities  a  small  fraction  of  the  margin 
thus  collected.  The  universities  need  this  income  only  because 
they  deliberately  charge  the  Consumer  of  education  less  than 
its  natural  cost.  But  neither  policy  is  inevitable. 

The  deplorable  consequences  resulting  from  this  indirect,  un- 
natural and  inconsistent  method  of  deriving  support  for  both 
universities  and  factories — from  their  sole  source  of  support, 
the  Ultimate  Consumer — will  be  debated  in  a  later  chapter 
dealing  with  educational  problems.  The  sole  point  at  present 
is  that  the  two  diametrically  contrasted  systems — the  profit-seek- 
ing, interest-bearing  system  and  the  non-profit-seeking,  interest- 
receiving  system — exist  side  by  side.  Both  of  them  have  been 
in  successful  operation  for  generations.  Any  discussion  of  in- 
terest which  omits  one  of  the  two  entirely  from  mention  is  in- 
complete, biased,  unscientific  and  unscholarly  to  the  last  degree. 

Any  sweeping  doctrine  that  either  of  them  is  impracticable 
is  absurd.  Any  statement  that  one  system  is  fitted  only  for 
one  duty,  and  the  other  for  the  other,  must  be  scrutinized  most 
carefully;  for  the  author  knows  of  no  line  of  demarkation  be- 
tween these  two  systems  which  aligns  itself  consistently  or 
permanently  with  anything.  History  shows  that  one  or  the 
other  prevails,  at  any  given  point  or  time,  only  by  haphazard 
chance,  uncorroborated  by  even  a  pretense  of  deliberate  reasoning 
in  the  selection. 

The  important  answer  to  all  this  confusion  of  ideas  as  to 
interest  or  non-interest  is  that  the  appliance  within  the  com- 
mercially owned  factory  bears  interest  only  against  the  Ultimate 
Consumer.  Whether  the  appliance  be  located  in  an  interest- 
paying  factory  or  a  non-interest-paying  university,  it  bears  no 


288  MODERN  ECONOMIC  TENDENCIES 

interest  against  the  man  who  uses  it.  The  man  who  uses  it 
neither  owns,  borrows,  nor  pays  interest. 

As  soon  as  the  fact  shall  have  become  generally  recognized 
that  the  user  is  merely  the  agent  of  the  Ultimate  Consumer, 
then  it  will  be  equally  recognized  that  neither  ownership,  nor 
borrowing,  nor  interest-payments  are  necessary  anywhere  in 
our  economic  system,  whether  in  the  supply  of  food,  clothing, 
education  or  what  not. 

Professor  Fisher's  nearest  approach  to  a  recognition  of  this 
broad  question  runs  as  follows  (page  41  of  his  book)  : 

"Socialists  would  cease  to  think  that  interest  is  extortion 
if  they  would  try  the  experiment  of  sending  a  colony  of 
laborers  into  the  unreclaimed  lands  of  the  West,  letting  them 
develop  and  irrigate  those  lands,  and  build  railways  upon 
them,  unaided  by  borrowed  capital.  The  colonists  would  find 
that  interest  had  not  disappeared  by  any  means,  but  that  by 
waiting  they  had  themselves  reaped  the  benefit  of  it.  They 
would  need  to  wait,  let  us  say,  five  years  before  their  railway 
was  completed.  At  the  end  of  that  time  they  would  own 
every  cent  of  its  earnings,  and  no  'capitalist'  could  be  accused 
of  robbing  them  of  it.  But  they  would  find  that,  in  spite 
of  themselves,  they  had  now  become  capitalists,  and  that  they 
had  become  so  by  stinting  for  those  five  years,  instead  of 
receiving  in  advance,  in  the  shape  of  food,  clothing  and  other 
real  income,  the  discounted  value  of  the  railroad.  This 
example  was  almost  literally  realized  in  the  case  of  the  Mor- 
man  settlement  of  Utah." 

This  is  a  pertinent  illustration.  It  should  be  examined  care- 
fully. 

First,  does  Professor  Fisher  really  dare  to  suggest  that  it  is 
the  capitalists  of  the  world  who  are  characterized  by  devotion 
to  "stinting"  themselves,  while  it  is  those  Ultimate  Consumers 
who  pay  interest  without  receiving  it,  who  indulge?  Of  all 
the  ancient  and  untenable  theories  of  interest  this,  we  thought, 
was  the  first  to  hide  its  absurdity  from  the  glare  of  obvious 
facts. 

Yet  it  is  true,  of  course,  that  the  community  as  a  whole 
must  defer  its  enjoyment  of  the  capital  invested  in  the  road 
until  it  may  begin  to  bear  fruit.  That  is  inevitable.  But  this 
is  a  very  different  proposition  from  the  multiplication  of  the 


OTHER   FEATURES   OF  INTEREST  289 

inevitable  burden  of  stinting  upon  the  many,  in  order  that  the 
few  called  capitalists  may  be  relieved  from  all  burden  of  stinting, 
which  is  the  interest-paying  plan. 

Factory- System  Capital  for  Extensions. — But  does  the 
building  of  the  road  really  involve  any  perceptible  stinting?  Is 
there  no  way  of  incurring  this  burden  so  gradually,  and  of 
distributing  it  among  all,  so  that  the  average  stinting  would 
become  imperceptible  at  the  start,  and  would  cease  as  soon  as 
the  road  became  productive  ? 

The  factory-system  gives  the  answer.  The  colonists  have  only 
to  co-operate,  in  the  building  of  the  railways,  in  the  manner 
now  standardized  within  every  factory,  in  order  to  so  distribute 
the  stinting  as  to  annul  its  resent  odious  disparity.  They  have 
only  to  build  gradually,  so  that  each  facility  aids  the  building 
of  the  next,  in  order  to  reduce  the  aggregate  stinting  at  any 
one  time  to  an  imperceptible  fraction  of  the  whole  effort  of 
society. 

This,  indeed,  was  the  plan  followed  by  the  Mormons.  They 
did  not  follow  the  capitalistic  system,  where  the  many  pay  in- 
terest to  the  few.  They  followed  the  factory-system  instead, 
as  Professor  Fisher  suggests.  They  all  stinted  together.  And 
in  the  ejid,  had  they  remained  uncontaminated  by  the  commer- 
cial world  outside,  their  plan  of  stinting  would  have  ended  nat- 
urally in  communism,  not  in  capitalism,  so  far  as  the  railway 
was  concerned. 

Our  actual  society,  when  considered  as  a  whole,  has  always 
followed  this  gradual  plan  in  the  past.  Each  innovation  is,  in 
fact,  but  a  microscopic  excresence  from  the  world  of  existing 
appliances.  But  it  lias  suited  the  profits  of  the  commercialists, 
and  the  prejudices  of  their  apologists,  to  assume  that  things 
are  otherwise — to  assume  that  each  new  facility  must  be  created 
from  a  world  devoid  of  facilities,  or  in  a  world  in  which  each 
old  facility  is  debarred  from  helping  each  new  one.  For  other- 
wise the  illustration  adduced  by  Professor  Fisher  becomes  sheer 
nonsense. 

For  under  a  complete  national  factory-system  the  community's 
entire  stock  of  rails,  ties,  beans,  etc.,  would  belong  to  the  com- 
munity of  Ultimate  Consumers.  This  property-right  would  have 
been  acquired  when  the  producer,  as  he  made  these  things,  had 
been  paid  in  cash,  in  the  form  of  wages.  This,  indeed,  is  the 
process  now  actually  occurring  daily,  except  that  the  commer- 


290  MODERN   ECONOMIC   TENDENCIES 

cialist  now  steps  in  between  Ultimate  Consumer  and  producer, 
passes  a  part  of  the  Consumer's  cash  to  the  producer,  keeps  the 
rest  himself,  and  incidentally  retains  legal  title  to  the  surplus 
and  the  appliances. 

Whatever  may  be  the  system,  the  decision  of  the  community 
to  build  a  road  or  other  facility  necessarily  calls  for  a  withdrawal 
of  some  of  this  stock  from  current  use.  This,  in  the  factory- 
system,  is  done  by  mere  requisition.  Whatever  may  be  the 
system,  the  effect  of  any  such  a  withdrawal  of  stock  from  current 
consumption  is  necessarily  to  decrease  slightly,  for  the  time, 
the  purchasing-power  of  every  dollar  in  the  land.  So  far  as 
the  building  of  the  road  necessitates  such  withdrawal,  this  stint- 
ing in  the  form  of  decreased  purchasing-power  must  continue 
until  the  road  has  become  operative  and  productive. 

But  the  real  stinting,  it  must  be  remembered,  was  incurred 
when  the  stock  was  manufactured,  withdrawn  from  current  con- 
sumption, and  accumulated  as  stock,  before  the  road  had  been 
decided  upon.  There  is  no  sign  that  the  mere  decision  to 
devote  this  stock  to  some  specified  aim  constitutes  a  conscious 
burden  upon  the  community — under  a  natural  system,  at  least. 

Further — and  this  must  particularly  be  kept  in  mind — all 
this  accumulation  of  tangible  stock  against  the  need  for  exten- 
sions, and  the  resultant  stinting  of  the  purchasing-power  of  the 
Consumer's  dollar,  actually  occurs  to-day,  just  as  if  we  had  a 
pure  and  complete  factory-system,  without  any  parasitical  com- 
mercial system  superimposed  thereon.  The  cost  of  our  exten- 
sions of  facilities,  like  that  of  our  current  supplies,  is  made  up 
of  the  inevitable,  natural,  factory-system  cost  plus  the  super- 
imposed costs  of  commercial  ownership-in-industry. 

In  other  words,  the  people  are  now  already  performing  all 
the  stinting  naturally  incidental  to  the  construction  of  all  the 
temporarily  unproductive  enterprises  now  currently  undertaken, 
and,  in  addition  thereto,  are  bearing  the  much  heavier  burden 
of  stinting  due  to  the  imposition  of  capitalistic  tribute,  on  top 
of  the  inevitable  temporary  unproductivity.  The  existence  of 
the  former  is  no  excuse  for  the  imposition  of  the  latter,  in 
addition.  The  presence  of  the  latter  does  not  relieve  the  people 
from  the  former.  Since  the  people  now  bear  both,  they  certainly 
would  be  better  able  to  bear  the  first  alone. 

Finally,  under  a  complete,  national  factory-system,  as  soon 
as  the  road  had  become  productive,  then  its  effect  would  be  to 


OTHER  FEATURES  OF  INTEREST  291 

elevate  automatically  the  purchasing-power  of  every  dollar  in 
the  land,  well  above  where  it  was  before  the  enterprise  was 
undertaken.  Considering  the  large  number  of  new  enterprises 
continually  maturing,  each  of  them  an  off-shoot,  in  effect,  of 
some  established  productive  enterprise,  there  would  be  no  real 
nor  conscious  stinting  anywhere.  The  expansion  of  facilities, 
viewed  as  a  unitary,  national  process,  is  a  continuous  and  a  con- 
tinually profitable  enterprise. 

But  to-day,  under  the  existing  commercial  system,  the  pur- 
chasing-power of  the  dollar  is  actually  being  decreased  by  the 
construction  of  each  new  road  or  factory.  That  is  the  explana- 
tion of  the  world-tide  of  discontent.  This  is  so  not  at  all 
because  of  the  temporary  unproductiveness  of  such  enterprise 
during  construction,  but  because  of  the  permanent  and  cumula- 
tive burden  of  interest-charges  which  commercialism  attaches 
gratuitously  thereto,  which  began  before  the  first  surveyor's  line 
was  run,  which  grows  (rather  than  decreases)  with  the  profit- 
ableness of  the  road,  and  which  continues  for  generations  after 
the  last  rail  and  car  (of  the  date  when  the  road  first  became 
productive)  has  worn  and  rotted  into  dust! 

The  commercial  system  goes  far  out  of  its  way  to  regard 
each  new  extension — which  is  in  reality  merely  an  imperceptible 
expansion  of  that  vast  unitary  productive  system  which  has  long 
supported  the  life  of  the  people,  and  which  that  life  supports — 
as  a  matter  independent  of  the  rest  of  the  productive  system, 
and  as  belonging  to  some  group  of  capitalists.  It  is  because 
of  this  policy,  and  not  at  all  from  any  inevitable  temporary 
unproductiveness,  that  the  extension  of  our  facilities  now  stands 
as  a  continually  increasing  burden  imposed  most  inequitably — 
doubling  the  stinting  of  those  who  must  stint  anyhow,  and 
doubling  the  luxury  of  those  who  never  stint,  yet  who  are  being 
paid  enormous  sums  as  balm  for  a  self-sacrifice  which  they 
never  make — as  balm,  according  to  Professor  Fisher,  for  a  delay 
in  enjoyment  which  they  never  incur. 

Pioneering  under  Commercialism.— Thus  we  decline  to 
admit  that  a  band  of  pioneers  penetrating  a  virgin  wilderness, 
and  developing  it  with  no  accumulation  of  helpful  appliances 
already  in  their  hands,  is  any  proper  simile  for  the  guidance 
of  a  long  settled  and  intricately  organized  community,  such  as 
this  nation  has  now  been  for  a  generation  at  least — rich  in 
the  daily  enjoyment  of  the  fertility  of  a  vast  mass  of  technical 


292  MODERN   ECONOMIC   TENDENCIES 

appliances,  all  created  by  wage  or  salary-paid  men,  in  shop, 
laboratory  and  scientific  school,  with  the  aid  of  which  all  further 
extensions  may  and  must  be  accomplished. 

Yet,  even  so,  the  Mormons  might  have  asked  themselves  most 
pertinently:  Shall  we  all  stint  together  equally  for  five  years 
or  so,  until  our  work  may  have  borne  fruit  ?  Or  shall  we  borrow 
of  this  richest  Mormon,  stint  harder  than  ever  while  he 
luxuriates  upon  our  interest-payments,  and  then  continue  to 
stint  indefinitely  thereafter,  in  order  to  pay  him  interest  upon 
a  steadily  increasing  debt,  the  principal  of  which  he  will  not 
allow  us  to  repay,  nor  even  to  keep  from  expanding,  although 
the  railroad  may  long  since  have  become  fruitful? 

So  far  as  the  author  is  aware,  the  Mormons  did  ask  them- 
selves just  this  question  between  communism  and  commercialism, 
and  did  decide  unwaveringly  against  commercialism — although 
they  were  unable  to  continue  the  policy  later,  in  the  face  of  an 
overwhelming  national  tide  of  commercialism  all  about  them. 
The  agreement  of  the  Mormons  to  stint  all  together  brought 
the  productive  stage  of  their  appliances  into  usefulness  for  each 
citizen  as  soon  as  it  was  physically  possible  for  the  appliance 
to  produce  at  all.  But,  had  they  adopted  the  commercial  plan 
instead,  the  bulk  of  the  community,  even  three  or  four  genera- 
tions after  their  settlement  of  the  wilderness,  would  still  be 
hopelessly  stinting  all  the  life-traffic  would  bear — contending 
against  a  dearth  of  all  appliances,  so  far  as  usefulness  to  them 
was  concerned,  as  desolate  and  discouraging  as  when  their 
ancestors  first  trod  the  primeval  forest. 

Therefore  Professor  Fisher's  illustration  proves  conclusively 
only  one  thing,  and  that  is  that  he  has  no  comprehension  what- 
ever of  the  modern  phenomenon  of  interest;  for  his  imaginary 
band  of  pioneers,  all  stinting  together  for  five  years  while  the 
road  is  unproductive,  in  order  that  they  may  later  enjoy  in- 
definitely together,  has  not  a  single  feature  in  common  with 
modern  commercial  capitalizations  and  interest-payments. 

Commercialism  versus  Wilderness  as  an  Obstacle. — In  this 
fact  of  the  choice  between  starvation  or  interest-payment,  which 
commercialism  now  imposes  upon  us,  lies  one  of  the  heaviest 
indictments  against  commercialism — one  of  the  many  evidences 
that  it  holds  back,  rather  than  promotes,  progress.  For  Professor 
Fisher's  own  philosophy  shows  that,  under  commercialism,  the 
position  of  the  great  mass  of  citizens  is  one  of  a  deprivation  of 


OTHER   FEATURES   OF   INTEREST  293 

access  to  all  the  helpful  appliances  of  modern  technology  which 
is  only  barely  letter  than  having  no  appliances  whatever,  until, 
after  a  generation  of  effort,  they  might  create  them  themselves! 

It  is  both  the  policy  and  the  proud  accomplishment  of  capi- 
talism that  it  charges  progress,  as  well  as  current  life,  all  which 
the  traffic  will  bear.  It  avowedly  (now  that  Professor  Fisher 
has  spoken)  holds  progress  back  to  that  minor  fraction  of  the 
rate  naturally  potential  which  will  still  bring  to  it  its  maximum 
tribute,  just  as  it  holds  back  the  current  consumption  of  flour 
and  every  other  commodity  to  the  same  minimum. 

Actually,  for  most  of  us,  life  to-day  is  even  more  discouraging 
than  this;  because  the  grandeur  and  freedom  of  the  wilderness 
is  gone,  while  the  unattainable  luxury  of  the  rich  increasingly 
taunts  and  mocks  us.  If  this  were  not  so,  human  contentedness 
would  be  stationary. 

It  is  common  knowledge  that  it  is  decreasing,  the  world  over. 
Traffic  has  everywhere  been  charged  a  little  more  than  it  can 
bear.  The  stress  gradually  approaches  the  limit  of  elastic  en- 
durance. 

Present  Inequity  of  Capitalism. — For  the  inequity  embodied 
in  the  origin  of  capitalism,  however  its  protagonists  may  explain 
the  wrong,  gives  us  only  a  faint  grasp  of  its  later  growth — 
for,  as  Billy  Sunday  says:  "All  sins  have  dimples  and  blue 
eyes  when  they  are  young."  It  is  only  in  its  later  developments, 
after  enterprises  whose  temporary,  infantile  unproductivity  gave 
excuse  for  the  birth  of  capitalism  have  become  amazingly  produc- 
tive, that  its  inequities  become  striking  in  magnitude,  however 
obscured  by  intricacy  of  organization.  It  is  only  then  that  the 
contrast  between  the  factory-system  and  the  commercial  methods 
of  extending  our  appliances  becomes  visible  in  two  points  of 
superior  equity  attaching  to  the  former,  namely: 

1.  Under  the  assumption  of  a  nationally  complete  factory- 
system,  the  burden  due  to  the  temporary  unproductiveness  of 
each  enterprise  will  have  ceased  when  the  latter  has  become  produc- 
tive.   From  that  time  forward  the  entire  community  is  enriched 
thereby,  not  through  dividends,  but  through  the  reduced  cost 
of  living  due  to  the  service  of  the  appliance  without  the  exaction 
of  dividends.     Except  in  this  respect  the  community  has  no 
consciousness  of  the  new  appliance's  presence. 

2.  Every  baby  born  into  the  community,  whatever  the  cir- 
cumstances of  its  parentage,  has  presented  to  it  by  the  entire 


294  MODERN   ECONOMIC  TENDENCIES 

adult  community  all  the  legitimate  fruits  of  ownership  in  the 
road,  namely,  reduced  cost  of  living.  No  newcomer,  rich  or 
poor,  babe  or  aged,  native  or  immigrant,  would  then  ever  be 
forced  to  pay  any  "agio  or  premium"  to  somebody  for  the  latter's 
kindness  in  deferring  the  enjoyment  of  their  wealth  until  some 
property  which  has  long  been  productive  shall  have  become 
productive — which  is  the  sort  of  a  niggardly  hold-up  extended 
as  a  welcome  to  every  fresh  arrival  to-day. 

Submarine  Economics. — No;  capitalism  is  not  the  fruit  of 
an  advantage  gained  by  the  thrifty  against  the  unthrifty,  but 
by  unscrupulous  strength  against  weakness,  by  maturity  against 
adolescence,  by  adults  against  babes.  The  sneaking  German 
U-boat  baby-killers  are  not  one  whit  worse,  except  that  they 
are  more  conscious  of  what  they  do,  than  are  the  businessmen 
who,  working  with  concealed  ledgers  and  disguised  lines  of 
influence,  operate  beneath  the  surface  to  put  up  prices  against 
the  Ultimate  Consumer — ignorant  and  reckless  of  whether  they 
thereby  hit  a  commercial  combatant  amongst  their  own  peers, 
or  the  weakest  and  most  innocent  in  the  land. 

For  let  them  know  forever  after  reading  these  words  that 
the  only  thing  certain  about  their  indiscriminate,  mine-sowing, 
commercial  warfare  is  that  they  are  sure  to  hit  all  grades  and 
classes  of  Consumer,  the  weakest  and  most  innocent  with  the 
strongest — and  they  hit  the  weakest  the  hardest.  Amongst  the 
crowded  millions,  pitifully  massed,  into  which  they  are  firing 
their  commercial  shrapnel,  there  are  a  thousand  weaker  than 
they  to  one  man  of  their  own  class. 

This  picture  is  literally  true.  Babies  are  continually  dying, 
school-children  are  daily  failing  in  their  education,  boys  are 
drifting  into  "dope-fiends"  and  girls  becoming  "missing"  by  the 
thousands  per  month,  merely  through  malnutrition,  both  of 
body  and  mind,  and  through  the  continual  deficit  in  employ- 
ment, due  to  high  prices.  No  reader  may  lay  any  claim  to  an 
understanding  of  modern  civilization  who  has  failed  to  realize 
how  our  modern  American  autocracy  of  military  commercialism 
has  been  built  up  by  the  relatively  stronger  of  the  land  against 
its  weakest — against  the  babes,  the  widows,  the  youth  lacking 
opportunity,  the  aged  lacking  shelter,  the  non-commercial  lovers 
of  art,  craft  or  science  (all  of  whom  instinctively  dislike  con- 
flict), and  those  born  deficient.  For  all  are  Ultimate  Consumers. 
All  must  pay  daily  homage  at  the  shop-counter. 


OTHER  FEATURES  OF  INTEREST  295 

Foresight  and  Commercialism. — Professor  Fisher  forgets 
that  the  commercial,  interest-bearing  plan  offers  marked  con- 
trast, even  in  more  general  ways,  with  that  which  he  suggests 
for  the  Mormons.  In  the  first  place,  it  is  not  the  community, 
under  commercialism,  which  decides  that  a  new  railroad  or  the 
like  is  needed.  It  is  a  group  of  capitalists. 

It  is  true  that  there  must  exist  a  natural,  if  latent,  need  for 
the  road,  else  it  could  not  pay.  But  the  all-important  element 
here  lost  to  sight  is  that  it  would  be  an  inconceivable  gain  in 
that  solidarity  which  alone  constitutes  civilization  if  the  com- 
munity were  left  by  the  capitalists  without  a  road,  until  the  need 
had  become  so  great  that  the  community  was  forced  to  act  as 
a  unit  in  obtaining  one. 

It  is  the  foresight  of  the  capitalists  in  anticipating  the  com- 
munity's needs  which  is  commonly  urged  as  warrant  for  their 
huge  returns.  But  foresight  alone  does  not  deserve  either  credit 
or  cash.  It  is  the  method  of  its  use.  If  used  to  aid  mankind 
it  is  a  credit;  but  if  used  for  selfish  advantage  it  is  a  shame. 

The  civilized  world  has  always  taken  for  granted,  for  instance, 
in  regard  to  foresight  in  connection  with  medical,  surgical  and 
scientific  discoveries,  that  they  must,  in  honor  and  decency, 
be  disclosed  for  the  good  of  society,  without  the  slightest  attempt 
by  the  discoverer  at  the  reservation  of  proprietary  control  or 
pecuniary  reward.  The  person  making  any  such  an  attempt 
is  promptly  ostracized,  by  profession  and  public  alike.  Why, 
then,  should  we  deem  it  so  essential  that  effort  in  organizing 
industry,  with  foresight  as  to  human  needs,  must  be  promised 
huge  proprietary  returns,  else  it  will  not  assert  itself? 

Society  to-day  needs  industrial  organization  of  the  Ultimate 
Consumers  to  secure  low  prices  far  more  than  it  needs  cancer- 
cures  or  tuberculosis  serums.  Why  cannot  those  who  are  able 
to  organize  the  people  be  willing  to  work  for  the  good  of  society, 
plus  that  meager  pecuniary  reward  which  (so  they  assure  the 
scientists)  is  ample  basis  for  scientific  happiness? 

Proprietary  Rewards  and  Progress. — Indeed,  the  whole 
profession  of  medicine,  etc.,  stands  as  a  reassurance  to  us  in 
our  vain  worryings  over  "human  nature,"  with  its  alleged  per- 
verse refusals  to  do  what  is  right  unless  rewarded  with  what 
is  obviously  wrong.  For  in  medicine,  out  of  that  whole  branch 
of  the  science  which  subsists  upon  proprietary  rewards — patent 
medicine — there  has  come  not  a  single  item  of  permanent  value 


296  MODERN   ECONOMIC  TENDENCIES 

to  mankind,  as  judged  by  mature,  unbiased  experience  after  the 
patents  have  expired. 

The  whole  business  in  patent  medicines,  like  that  in  most  of 
the  needlessly  numerous  brands  of  all  sorts  of  commercial  nos- 
trums, is  kept  alive  only  by  a  continuous  hoodwinking  of  the 
people,  through  costly  advertising.  Not  only  is  a  patent 
medicine  dropped  by  the  public  as  soon  as  its  advertising  ceases, 
but  it  is  an  axiom  in  this  trade  that  it  does  not  pay  even  to 
keep  a  remedy  alive  by  advertising  it,  longer  than  a  few  months 
or  years.  Its  aid  to  mankind  is  so  imaginary  that  after  a  short 
time  not  even  advertising  can  sell  it. 

Conversely,  and  directly  in  denial  of  that  most  widespread 
of  all  modern  superstitions — that  superstition  to  the  effect  that 
human  beings  will  do  nothing  except  as  hired  thereto  by  exag- 
gerated pecuniary  reward — there  stares  us  in  the  face  the  one 
most  striking  fact  concerning  relative  advance  in  medicine  and 
other  lines  of  human  progress.  This  is  that  that  one  field  of 
effort — purely  scientific  medicine  and  surgery — which  is  denied 
all  hope  of  proprietary  reward,  or  even  decent  income,  has  ac- 
complished the  most  striking  progress  in  the  relief  of  human 
suffering  of  any  of  the  many  lines  of  human  effort.  No  branch 
of  human  knowledge,  and  least  of  all  those  induced  by  the 
highest  rewards  offered  by  commercialism,  has  ever  made  any- 
thing like  the  advance  evinced  by  medicine  and  surgery,  both 
curative  and  preventive. 

Indeed,  preventive  medicine  and  hygiene  is  one  of  those 
peculiar  branches  of  science  wherein  effective  effort  cuts  off 
automatically  even  what  little  reward  commercialism  has 
normally  left  to  these  scientists,  in  that  it  decreases  disease, 
and  therefore  the  demand  for  the  service  of  the  physician.  Yet 
this  branch  of  medicine  has  made  more  rapid  strides  than  any 
other ! 

This  whole  book's  indictment  against  commercialism  may 
thus  be  condensed  within  the  statement  that  the  latter's 
sovereignty  over  our  life  has  reduced  our  civilization,  in  its 
efficacy  for  health  and  happiness,  and  in  its  standards  of  dignity 
and  taste,  to  the  level  of  the  patent-medicine  world.  There, 
both  in  the  sale  of  proprietary  remedies  and  in  commercialism, 
egotistical  personalities  intrude  their  names  and  faces  at  every 
turn,  to  burden  us  with  nostrums  without  which  we  were  better 
off.  The  contrast  between  this  policy  and  the  dignity  and  worth 


OTHER   FEATURES  OF  INTEREST  297 

of  the  medical  profession  is  exactly  the  contrast  we  are  trying 
to  draw  between  our  present  crude  civilization,  guided  by  its 
sordid  quest  for  private  profits,  and  what  it  will  become  imme- 
diately upon  the  extension  of  the  factory-system  to  include  all 
citizens  and  all  functions. 

The  commercialists,  who  four  generations  ago  were  excluded 
everywhere  from  decent  society,  and  whose  philosophy  and  policy 
(when  once  its  effects  are  understood)  classes  them  to-day  with 
the  promoters  of  patent-medicine  profits,  need  hope  for  no 
sympathetic  ear  for  their  complaints  when  they  shall  have  been 
forced  to  bunk  in  with  the  intellectual  and  artistic  classes  of 
society,  in  pay.  By  the  change  they  will  have  acquired  a  dignity 
which  to-day  they  cannot  even  understand. 

The  Crude  Blunder  of  1840. — It  was  our  false  choice  in 
1840  between  these  two  standards  of  ethics,  economics  and  form 
of  organization  which  formed  the  gigantic  mistake  made  by 
America,  in  facing  her  pioneer-problems,  when  failing  state- 
enterprise  was  replaced  by  the  nationwide  policy  of  private 
ownership,  for  indefinite  profits,  as  "the  easiest  way."  The 
crudity  of  those  times  and  the  glittering  rewards  then  promised 
for  the  prompt  conquest  of  natural  obstacles,  which  dazzled  the 
young  nation,  form  ample  excuse  for  the  loss,  of  this  inestimable 
opportunity  for  development  of  the  communal  spirit.  Never- 
theless, it  would  have  been  far  better  if  the  construction  of  the 
canals  and  railroads  should  have  awaited  the  community's  first 
becoming  fit,  not  by  talk  but  by  need,  for  enjoying  the  fruits 
of  its  own  labor.  But  evolution  never  proceeds  so  smoothly  and 
comfortably  as  that. 

Economic  Patriotism. — Then  the  capitalists  must  recognize 
that,  not  only  are  they  under  heavy  patriotic  responsibility  to 
guide  the  community  into  a  united,  efficient,  nationwide  factory- 
system,  but  that  the  people's  present  gropings  in  that  direction, 
in  its  childish  attempts  at  public  enterprise,  are  abortive  only 
because  these  big  and  able  men  systematically  withhold  their 
sympathy  and  aid,  contributing  instead  only  sneers  at  the  ap- 
parent failure  of  public  initiative! 

What,  it  may  well  be  asked,  would  now  be  America's  position 
in  the  world's  esteem  and  her  own  self-respect  (to  say  nothing 
of  her  stability  as  a  nation)  had  she,  because  the  stronger  nation 
and  the  more  remote  from  stress,  adopted  toward  France's  in- 
ability to  stop  the  Hun  that  same  attitude  of  contemptuous 


298  MODERN   ECONOMIC   TENDENCIES 

aloofness  which  our  large  men  of  affairs  now  maintain  toward 
this  nation's  present  awkward,  incompetent  strivings  at  self- 
defense  against  rising  prices?  Yet  the  rising  prices  and  other 
features  of  commercialism  constitute  a  far  more  insidious,  un- 
scrupulous and  powerful  enemy  of  American  stability  than  Ger- 
man militarism  ever  had  a  long  chance  of  being. 

Commercialism  vs.  Socialism. — Let  us  now  consider  Profes- 
sor Fisher's  theory  of  interest  in  its  relation  to  socialistic 
thories.  Probably  the  best  statement  of  this  is  found  in  a 
full-page  article  in  the  New  York  Times  for  Oct.  30,  1910. 
The  whole  tenor  of  his  article  may  be  found  in  the  following 
quotation: 

"Interest  is,  as  it  were,  impatience  crystallized  into  a  market- 
rate.  ...  A  socialist  laboring-man  once  did  some  work  for 
me.  When  the  time  came  to  pay  him  we  fell  into  a  discussion, 
during  which  he  informed  me  that  interest-taking  was  wrong, 
that  any  lender  ought  to  be  content  with  the  return  only 
of  his  principal,  without  interest.  Thereupon  I  asked  him 
if  he  were  willing  to  lend  me  without  interest  for  twenty 
years  the  $25  which  I  owed  him;  in  other  words,  to  wait 
twenty  years  for  his  pay.  To  this  he  answered  very  simply 
that,  being  a  poor  man,  he  could  not  afford  to  wait.  I  then 
offered  to  pay  him,  in  case  he  would  wait  twenty  years,  not 
only  the  $25,  but  the  interest  upon  it;  but  he  said  he  would 
rather  have  his  $25  at  once  than  even  $100  twenty  years 
later.  His  answer  revealed  the  essential  fallacy  in  his 
philosophy,  and  led  him  to  see  that  prepayment  is  a  favor 
worth  something  to  the  laboring-man — a  great  deal  in  fact." 

But  the  workman  was  asking  for  no  "prepayment."  He  had 
done  the  work  and  created  the  value.  It  was  properly  his  to 
enjoy  immediately;  and  this  was  true  even  if  he  had  been  set 
to  work  upon  something  not  to  be  immediately  productive. 

For  the  value  was  latent,  even  if  not  immediately  tangible. 
The  penalty  of  delayed  joy  due  to  this  fact  certainly  rests  upon 
him  who  assumes  to  decide  upon  the  undertaking  of  speculative 
enterprises,  or  upon  him  who  is  to  enjoy  their  later  fruits,  and 
not  upon  him  who,  as  an  underling,  merely  executes  orders. 
Indeed,  the  whole  philosophy  of  the  commercialists  toward  the 
working-classes  smacks  altogether  too  much  of  the  Hohenzollern 
disposition  to  set  others  to  doing  piracy  for  them,  while  they 


OTHER   FEATURES   OF   INTEREST  299 

enjoy  the  spoils  and  cast  the  obloquy  upon  their  catspaws,  to 
find  permanent  favor  in  America. 

Professor  Fisher's  workman  was  not  learned  enough  to  tell 
him  what  the  professor  of  political  economy  should  have  known 
without  being  told,  namely,  that  true  economics,  if  not  socialism, 
does  not  say  that  it  is  wrong  to  take  interest,  but  that  it  is 
wrong  either  to  lend  or  to  borrow  for  pecuniary  gain,  whether 
in  the  form  of  interest  or  profits — that  the  great  modern  wrong 
is  that  society  should  ever  allow  anyone  to  be  tempted  either 
to  lend  for  interest,  or  to  borrow  from  necessity. 

For  any  such  a  contract,  whatever  may  be  the  human  natures 
upon  either  side,  is  just  as  wrong,  and  works  equal  evil  upon 
society,  as  do  such  forbidden  contracts  as  slavery  or  prostitution. 
Professor  Fisher  should  teach  emphatically  his  every  student 
that  borrowing  or  lending  at  interest,  like  slavery  or  prostitu- 
tion, always  enslaves  and  paralyzes,  in  effect — not  necessarily 
the  individuals  party  to  the  contract,  but  always  and  grievously 
the  Ultimate  Consumer,  albeit  indirectly  and  obscurely — through 
an  intricacy  of  commercial  mechanism  which,  we  are  sorry  to 
note,  is  quite  incomprehensible  to  educated  men,  for  all  the 
light  thrown  upon  it  by  Yale  University. 

In  any  rational  or  just  economic  society  neither  the  Professor 
nor  the  workman  would  be  free  to  debate  the  fate  of  the  $25. 
The  employer  could  then  secure  the  man's  services  only  through 
the  Central  Office  of  the  district  in  which  they  lived,  where 
every  citizen  would  be  registered,  and  his  rate  of  pay,  as  de- 
termined by  a  law  of  supply  and  demand  of  which  we  now  have 
little  comprehension,  recorded.  Each  day  on  which  this  man 
reported  his  willingness  to  work  he  would  be  credited  on  the 
books  of  the  local  community-bank  with,  say,  two  dollars,  or 
any  other  sum  befitting  the  prices  of  the  time,  on  an  account 
against  which  he  could  draw  cash  or  write  checks  as  in  any 
bank  to-day. 

This  would  be  done  not  necessarily  because  he  had  worked 
that  day,  but  because  he  was  alive,  and  a  potential  unit  for 
production  which  society  could  not  possibly  afford  to  leave  to 
any  haphazard  subsistence.  He  would  be  credited  with  the  two 
dollars  exactly  as  a  mule  is  fed  daily  in  its  stall,  whether  it 
wears  harness  or  not,  because  it  is  crazy  inefficiency  to  do  other- 
wise. 

If  twelve  and  one-half  days  of  the  man's  time  had  been  called 


300  MODERN   ECONOMIC  TENDENCIES 

for  by  Professor  Fisher  the  $25  would  be  charged  against  the 
professor's  account  by  the  same  bank,  and  at  the  same  time, 
that  it  was  credited  to  the  man.  Neither  the  man  nor  the 
employer  would  be  given  the  slightest  opportunity  to  bargain 
over  either  the  time  or  the  fact  of  payment.  That  is  the  way 
in  which  transfers  of  value  between  man  and  man  are  conducted 
in  every  factory  in  the  land. 

As  to  the  rate  of  wages,  that  would  be  adjusted  for  each 
man,  from  time  to  time,  by  the  law  of  supply  and  demand, 
based  upon  statistics  drawn  from  tens  of  millions,  and  inter- 
preted by  a  Central  Office  which  neither  handled  any  funds 
nor  felt  the  slightest  bias  in  the  matter.  It  would  feel  no 
reluctance  to  raise  wages,  nor  any  inducement  to  raise  prices. 
Every  citizen  in  the  land  would  then  be  inwardly  conscious  of 
this  fact,  in  his  every  thought,  just  as  everyone  now  knows 
that  every  employer  is  always  under  glittering  inducement,  and 
sometimes  dire  pressure,  both  to  depress  wages  and  to  raise 
prices. 

As  to  the  balance  of  labor  between  trade  and  trade,  if  the 
Central  Office  finds  less  labor  offering  itself  in  any  given  line, 
at  any  established  wage,  than  would  supply  the  Consumer's 
demand  for  goods  in  that  line,  it  will  then  raise  both  wages  and 
prices  in  that  line,  to  bring  up  the  supply  of  labor  and  bring 
down  the  demand  for  it,  until  a  balance  has  been  re-established. 
But,  in  the  interim,  it  would  neither  be  so  insane  as  to  permit 
some  free  lance  of  a  profiteer  to  enter  the  field,  in  duplication 
with  the  established  organization,  to  supply  at  a  profit  the  Con- 
sumer's unsatisfied  demand;  nor  so  stupid  and  cruel  as  to 
condemn  the  workman  to  idleness  and  penury,  diminishing  his 
productive  efficiency,  until,  as  is  actually  the  case  now,  his  suffer- 
ings had  become  sufficiently  acute  to  prove  that  traffic  had 
indeed  been  crowded  more  than  human  nature  could  bear — all 
as  a  penalty  for  a  blunder  in  superintendence  for  which  the 
workman  cannot  by  any  twist  of  argument  be  held  responsible. 

Similarly  on  the  side  of  the  employer.  Industrial  employers 
would  then  all  be  salaried,  non-owning  superintendents,  and 
would  have  no  inducement  to  depress  wages,  nor  to  debar  labor 
from  employment,  except  merely  natural  pride  in  keeping  down 
prices  to  the  Consumer;  and  from  this  the  laborer  would  gain 
exactly  as  much,  to  a  penny,  in  his  prime  role  of  Ultimate 
Consumer  as  he  lost  in  wages  as  a  laborer.  It  is  unimaginable 


OTHER   FEATURES   OF   INTEREST  3U1 

that  any  superintendent,  under  these  conditions,  would  ever 
push  either  wages  down  or  prices  up,  to  the  point  of  creating 
any  such  a  general  discontent  with  both  as  now  prevails  over 
the  entire  civilized  world. 

As  to  the  fate  of  the  $25  credited  by  the  bank  to  the  work- 
man, that  he  may  spend  immediately  or  may  save  it  against 
old  age,  just  as  he  pleases.  But,  however  long  he  may  elect 
to  let  it  remain  in  the  bank,  it  will  return  to  him,  under  the 
guarantee  of  the  Treasury  of  the  United  States,  just  as  he 
earned  it — neither  swollen  by  one  penny  of  uncreated,  unearned 
interest,  nor  diluted  in  purchasing-power  by  someone  else's  drafts 
of  interest,  nor  shrunken  by  a  penny's  worth  of  undeserved 
bankruptcy  due  to  "beared"  securities. 

The  "Use"  or  Productivity  Theory  of  Interest.— Another 
academic  theory  of  interest  (but  one  not  supported  by  Fisher) 
is  that  based  upon  the  idea  that  living  capital,  such  as  forests, 
orchards  or  cattle,  has  a  natural  rate  of  growth;  and  that  in- 
animate capital,  as  an  aid  to  labor,  must  possess  an  equal  rate 
of  interest  with  the  animate,  in  order  to  maintain  financial 
equilibrium.  That  is  to  say,  capitalism  will  not  invest  in 
locomotives  unless  these  machines  develop  wealth  as  rapidly,  in 
connection  with  a  given  amount  of  labor,  as  if  the  investment 
were  in  growing  sheep. 

It  is  true,  as  the  productivity-theory  says,  that  financial 
equilibrium  between  animate  and  inanimate  capital  is  always 
maintained.  It  is  true,  as  Fisher  says,  that  capital  brings  its 
returns  only  after  delay.  But  it  is  not  true  that  interest  rests 
upon  either  of  these  facts. 

Fisher's  denials  of  the  productivity-theory  will  be  quoted  here, 
not  merely  to  disprove  the  productivity-theory,  but  also  to  upset 
Fisher's  own  conclusions,  *namely,  that  a  denial  of  the  produc- 
tivity-theory throws  one  back  upon  the  Fisher  theory.  The  fact 
is  that  neither  theory  is  true. 

Fisher  offers  an  illustration  which  is  in  essential  a  replica  of 
his  railroad  case,  but  referring  to  animate  capital.  He  says: 

"The  capitalist  is,  as  a  matter  of  fact,  always  living  on 
the  product  of  past  labor.  .  .  .  The  capitalists  of  to-day  are 
receiving  compound  interest  upon  the  labor  of  yesterday.  But 
it  does  not  follow  that  any  injustice  has  been  done  to  the 
laborer.  Let  us  revert  to  the  case  of  the  tree  planted  with 


302  MODERN   ECONOMIC   TENDENCIES 

$1  worth  of  labor,  which  25  years  later  was  worth  $3.  The 
socialist  virtually  asks,  Why  should  not  the  laborer  receive  $3 
instead  of  $1  for  his  work?  The  answer  is  that  he  may 
receive  it,  provided  he  will  wait  25  years  for  the  $3." 

But  this  last  statement  we  deny — top,  root  and  branch.  The 
standard  tragedy  of  the  economic  world  is  the  mass  of  faithful, 
productive  toilers  who  wait  patiently  their  twenty-five  years, 
only  to  find,  at  the  end  of  that  time,  that  they  do  not  receive 
even  the  $1  which  they  had  originally  earned! 

But,  overlooking  this  point  for  the  moment — and  also  the 
doubt  as  to  whether  this  is  a  fair  statement  of  socialism — in- 
terest is  justified  in  this  illustration  as  the  equivalent  of  the 
natural  growth  of  a  tree.  The  case  is  a  parallel  with  that  of 
the  railroad  in  that  the  reward  is  deferred  a  period  of  years, 
during  which  time  unproductive  labor  must  be  invested;  but 
here,  according  to  Fisher,  the  simile  ends.  The  fact  and  the 
rate  of  interest,  he  says,  is  due  to  the  delay  in  fruition  and  not 
to  the  character  of  the  capital,  whether  naturally  expansive  or 
not.  He  sums  up  his  whole  chapter  against  the  productivity 
theories  as  follows: 

"It  is  clear  that  although  interest  enters  into  the  processes 
of  nature,  it  is  not  because  of  their  physical  expansion,  but 
because  they  require  time.  It  is  not  because  the  seed  grows 
into  crops  or  the  egg  into  a  chick  that  there  is  interest,  but 
because  the  crops  or  the  chick  are  unavailable  until  a  future 
time.  .  .  .  The  conclusion  ...  is  that  physical  productivity, 
of  itself,  has  no  such  direct  relation  to  the  rate  of  interest 
as  usually  ascribed  to  it;  ...  It  is,  however,  quite  true  that 
the  productivity  of  capital  does  affect  the  rate  of  interest" 
(page  28;  italics  mine). 

But  if  productivity  "affects"  the  rate  of  interest  then  the 
productivity  theory  is  partly  true.  That  is  to  say,  interest  is 
the  result  partly  of  productivity  and  partly  of  something  else. 
But  this  idea  Fisher  does  not  accept. 

The  Dependence  of  Capital- Valuations  upon  Income.— 
The  idea  which  he  would  substitute  for  the  productivity  theory 
is  based  upon  what  he  considers,  and  what  the  author  also  con- 
siders, the  central  fact  of  the  question,  namely :  The  dependence 
of  the  valuation  of  capitalism  upon  the  income  which  it  is  pos- 


OTHER   FEATURES   OF   INTEREST  303 

sible  to  enforce  through  its  means.    This  might  be  called  the 
"tributary"  theory  of  interest. 

Fisher  states  repeatedly  and  emphatically  that: 

"Capital-value  does  not  produce  income-value.  On  the  con- 
trary, income- value  produces  capital- value."  (Page  13;  italics 
his.) 

He  cites  the  illustration  of  an  orchard.  Its  market-value  does 
not  depend  upon  the  weight  of  apples  produced,  but  upon  their 
market-price.  When  apples  rise  in  price  the  orchard,  although 
still  producing  the  same  weight  of  fruit,  becomes  more  valuable. 

"The  paradox  that,  when  we  come  to  the  value  of  capital, 
it  is  income  which  produces  capital,  and  not  the  reverse,  is, 
then,  the  stumbling-block  of  the  productivity  theorists." 
(Page  15;  italics  his.) 

But  this  fact  is  also  the  stumbling-block  to  Fisher's  theory; 
for  a  change  in  the  interest-exacting  power  of  any  piece  of 
capital  does  not  imply  any  change  in  the  delay  in  fruition,  as 
must  be  the  case  if  Fisher's  theory  be  true.  When  the  price 
of  apples  has  risen,  and  hence  the  valuation  of  the  orchard, 
that  does  not  imply  that  apples  are  now  growing  ripe  more 
slowly  than  once  a  year,  nor  that  apple-trees  have  come  to  grow 
more  slowly  to  maturity.  Our  fluctuations  in  prices  pay  little 
attention  to  any  such  slow,  natural  phenomena  as  that.  They 
leap  wildly  overnight — often  from  hour  to  hour. 

The  Tributary  Theory  of  Interest.— Indeed,  the  truth  stated 
by  Professor  Fisher — which  is  a  basic  one  in  interest-problems 
— is  a  stumbling-block  to  any  theory  except  the  "tributary"  one. 
This  theory  states  that  capitalism  (as  a  thing  quite  distinct  from 
capital)  exists  only  because  it  can  and  does  exact  tribute,  by 
force  of  circumstance.  It  is  created  solely  for  that  purpose. 
Its  valuation  is  appraised  in  those  terms.  Indeed,  if  it  fails 
in  that  purpose  it  automatically  ceases  to  exist.  Any  security 
which  ceases  to  exact  interest  for  its  owner  ceases  to  possess 
commercial  valuation  of  its  principal. 

There  is  no  conflict  at  this  point  between  the  Fisher  theory 
and  the  tributary  theory  of  interest.  Both  hold  that  the  capital- 
valuation  is  determined  by  the  interest  drawn,  and  not  the 
interest  by  the  valuation.  The  only  discrepancy  between  the  two 


304  MODERN   ECONOMIC   TENDENCIES 

theories  lies  in  the  personalities  concerned.  Fisher  says  that 
it  is  the  borrower  who  pays  the  interest,  and  the  person  who 
stints  now,  or  has  stinted  in  the  past,  who  receives  it.  The 
tributary  theory  says,  conversely,  that  it  is  the  Ultimate  Con- 
sumer who  pays-  the  interest,  and  who  must  stint  indefinitely 
and  increasingly  in  order  to  do  so,  while  it  is  the  person  who 
receives  interest  (if  in  appreciable  amount)  who  enjoys  imme- 
diate luxury. 

For  no  person  draws  interest  on  moneys  needed  for  current 
existence.  No  person  ever  has,  nor  ever  can,  accumulate  a 
dollar  by  interest  on  savings  from  wages,  because  prices  are 
raised  against  him,  by  his  own  interest-drafts  as  well  as  by  other 
commercial  processes,  faster  than  those  drafts  or  savings  ac- 
cumulate. Each  dollar  of  interest  raises  prices  against  the 
Consumer  by  a  dollar  plus  a  percentage.  For  the  Ultimate  Con- 
sumer is  the  only  source  of  interest-payments,  and  the  com- 
mercial world  will  not  handle  the  payment  for  nothing. 

Fisher  can  see  no  source  of  capitalism  except  the  stinting  of 
the  wage-earner,  slowly  accumulating  out  of  wages  a  margin 
over  current  cost  of  living,  which  may  then  be  invested.  But, 
even  disregarding  the  fact  that  prices  are  raised  by  interest- 
charges  faster  than  the  charges  grow  themselves,  the  tributary 
theory  says  that  certainly  not  one  twentieth — probably  not  one 
hundredth — of  the  current  supply  of  capitalism  arises  in  this 
way.  The  bulk  of  it  is  reinvested  dividends,  profits  and  surplus 
— never  produced  as  wages  in  the  first  place,  and  never  saved 
by  stinting  in  the  second,  but  all  of  it  extorted  from  the  Ultimate 
Consumer  across  the  retail  shop-counter. 

Indeed,  the  major  source  of  capitalism  to-day  (as  explained 
in  the  chapter  upon  Credit)  is  sheer  fiat-credit — securities 
boldly  printed  first,  and  then  given  valuation  by  proof  that  the 
Consumers  can  be  forced  to  pay  interest  upon  them,  through 
high  prices.  Such  capitalism  has  not  a  single  feature  in  com- 
mon with  Professor  Fisher's  alleged  picture  of  capital. 

The  Use-Theory  of  Interest. — As  to  the  "use"  theory,  Fisher 
says  further: 

"The  same  objections  which  have  been  indicated  in  relation 
to  the  productivity  theory  apply  to  what  Bohm-Bawerk  calls 
the  'use'  theories.  These,  in  fact,  are  a  special  and  improved 
form  of  the  productivity  theory."  (Page  16.) 


OTHER   FEATURES   OF   INTEREST  305 

K 

But  the  interesting  feature  of  all  this  is  that  this  relation 
between  the  income,  as  a  cause,  and  the  valuation  of  the  principal 
as  effect,  not  only  denies  the  use  and  productivity  theories.  It 
also  dissolves  all  foundation  for  the  "origin"  theory  advocated 
by  Fisher,  namely,  that  interest  is  earned  by  the  industry  and 
self-denial  originally  embodied  in  the  principal.  The  only  act 
which  produces  interest  is  the  exaction  of  tribute  by  force  of 
circumstance,  backed  by  a  lack  of  moral  scruple  against  doing 
so.  Therefore,  if  anything  may  be  said  to  "earn"  interest,  this 
alone  can  be  it. 

Again,  if  interest  really  depends  upon,  or  is  justified  by,  the 
diligence  and  thrift  involved  in  the  original  accumulation  of 
the  principal,  as  Fisher  argues,  then  it  must  remain  constant 
at  all  times  thereafter,  unaffected  by  any  later  variations  in 
the  interest-earning  power,  or  in  the  delay  in  fruition,  etc.  It 
must  even  be  true,  under  this  "origin"  theory  of  Fisher's,  that 
if  the  earning-power  should  sink  to  zero  the  interest  would  still 
be  paid — or  would  be  due,  at  least — because  the  origin  of  the 
capitalism  had  not  been,  and  could  not  be,  affected  by  these  later 
events. 

Yet,  from  the  commercial  viewpoint,  this  is  pure  reduction 
to  absurdity.  It  is  universal  knowledge  that  interest-rates 
fluctuate  constantly,  from  hour  to  hour,  as  rapidly  as  the  Con- 
sumer evinces  ability  to  be  charged  more  or  less. 

The  Ultimate  Consumer  the  Source  of  all  Capitalism. — 
Thus  Fisher,  in  emphasizing  this  dependence  of  principal-valua- 
tion upon  income,  is  supporting  ably  every  contention  raised 
in  these  pages.  But  what  it  proves  goes  further  than  he  per- 
ceives. For,  if  the  valuation  of  capital  varies  proportionately 
with  the  income,  then  the  principal  is  a  result  of,  or  is  created 
by,  the  income. 

Therefore,  whatever  valuation  the  principal  may  possess  has 
been  contributed  to  it  by  those  who  furnish  the  income.  There- 
fore the  title  to  it,  as  property,  belongs  to  those  who  created  it. 
These  are  the  Ultimate  Consumers  alone. 

This  is  no  irresponsible  word-juggling.  Indeed,  it  is  the 
actual,  visible  history  of  almost  all  current  interest-bearing 
securities.  Each  has  begun  with  a  valuation  approximately  zero. 
Then  as  the  exaction  of  income  upon  it  from  the  Consumer 
proved  to  be  practicable,  it  gradually  assumed  full  valuation. 
The  increase  in  valuation  ceased  only  when  it  had  been  found 


306  MODERN   ECONOMIC   TENDENCIES 

impracticable,  through  one  form  of  resistance  or  another  on 
the  part  of  the  Consumer,  to  increase  further  the  exaction. 

Originally  the  situation  was  not  so  bald  as  this.  Originally 
the  paper  represented  fairly  accurately  a  cash-investment  which 
was  temporarily  useful  to  the  Consumer.  But  the  cessation  of 
interest-payments  when  the  investment  became  fruitful  was 
neglected;  their  abandonment  when  the  appliances  originally 
purchased  had  rotted  to  nothing  was  overlooked;  and  from  that 
time  forward  there  has  accumulated,  in  geometric  progression, 
a  fund  of  securities  the  useful  appliances  back  of  which  have 
long  ceased  to  exist — and  with  their  dissolution  disappeared 
the  last  vestige  of  equity  in  the  interest-payments. 

To-day  one  needs  take  but  the  veriest  scrap  of  paper  and 
engrave  upon  it  the  stated  ownership  of  some  appliance  or 
opportunity  needed  by  the  people,  and  it  can  soon  be  made  equal 
to  money  in  its  purchasing-power.  Indeed,  the  stated  appliance 
or  opportunity  need  not  be  one  actually  needed  by  the  people; 
it  may  often  be  one  which  has  been  deliberately  placed  in  their 
way,  as  an  obstacle,  because  it  is  known  that  they  would  rather 
pay  tribute  on  it  than  to  go  around  it,  or  to  overthrow  it. 

This  is  true  to-day  of  the  bulk  of  all  the  different  "brands" 
or  "blends" — the  same  goods  with  another  name  and  wrapper, 
placed  on  the  market  solely  for  the  sake  of  the  profit  to  be  made 
by  advertising  it.  Yet,  as  soon  as  this  tribute  has  been  realized, 
the  paper  securities  issued  upon  it  become  money — to  an  amount, 
whatever  may  be  the  legend  on  their  face,  some  fifteen  times 
the  annual  tribute — the  lawful  property  of  him  who  had  suffi- 
cient "initiative"  to  print  the  paper,  enough  backbone  to  block 
the  normal  traffic  "all  it  would  bear/'  and  enough  nerve  and 
skill  to  collect  the  tribute. 

Zero  Interest-Bates. — Professor  Fisher,  quite  overlooking  the 
significance  of  the  existing  factory-system,  wishes  to  prove  that, 
unless  some  appreciable  interest-rate  be  maintained,  there  would 
be  no  way  of  supplying  the  workman  with  modern  appliances. 
For  this  purpose  he  adduces  the  extreme  illustrative  case  of  a 
community  in  which  the  interest-rate  is  supposedly  zero.  He 
naively  assumes  with  this,  without  a  word  of  explanation,  that 
the  appliances  used  in  his  illustration  would  still  be  personally 
owned. 

Yet  the  most  obvious  and  immediate  conclusion  to  be  drawn 
from  his  premises,  assuming  a  zero  interest-rate,  is  that  no 


OTHER   FEATURES  OF  INTEREST  307 

individual  Would  bother  to  own  any  appliances  whatever.  For 
the  sole  motive  for  that  unnatural  act,  in  any  community  of 
modern  intricacy,  is  the  collection  of  interest. 

Once  grant  his  premises  as  to  a  zero  interest-rate  and  it  must 
also  be  assumed  that  all  appliances  would  be  owned  solely  by 
the  Ultimate  Consumers  in  aggregate,  for  the  sole  purpose  of 
supplying  themselves  with  the  commodities  to  be  derived  from 
their  use,  and  without  any  folly  of  charging  themselves  interest 
thereon.  Such  would  be  the  ideal  economic  community.  But 
such  ownership  is  a  very  different  thing  from  the  ownership-in- 
industry  called  capitalism. 

Thus  Fisher  proves,  by  an  arithmetical  analysis  of  the  produc- 
tivity of  his  imaginary  factory,  that  in  this  case  the  "owner" 
would  receive  no  return  so  long  as  he  kept  up  his  plant  against 
depreciation — which  would  appear  to  be  an  obvious  corollary 
of  the  zero  interest-rate.  But  that,  if  he  let  his  plant  run  down, 
he  might  draw  out  its  original  value  in  the  form  of  produce 
sold,  but  no  more — which  is  also  an  obvious  deduction  from 
the  zero  interest-rate. 

For  a  zero  interest-rate  indicates  that  the  factory's  operations 
proceed  (as  they  naturally  should)  without  any  reference  to 
anybody's  ownership  whatever,  the  Consumers  paying  merely 
the  producers'  wages,  the  depreciation  and  the  raw  materials, 
and  nothing  more.  But  such  drafts  by  an  imaginary  and  im- 
possible "owner,"  from  a  factory  which  had  lost  its  sole  reason 
for  being  owned,  could  not,  by  any  intellectual  acrobat,  be  con- 
fused with  true  interest. 

Fisher  next  reads  into  this  situation,  as  if  it  were  an  axiom, 
his  assumed  theory  of  interest — namely,  solace  for  deferred  pay- 
ment of  principal — and  then  concludes: 

"If  it  be  asked  what  motive  could  ever  prompt  anyone  to 
keep  up  his  capital  when,  so  long  as  he  does  so,  all  income 
is  foregone,  the  answer  is  that,  under  our  assumption  of  zero 
interest,  .  .  .  the  owner  of  the  plant  would  just  as  willingly 
wait  a  hundred  years  for  his  $5500  as  receive  it  now." 
(Page  22.) 

But  this  is  ignoring  facts  and  reasoning  in  a  circle  with  a 
vengeance !  For  there  plainly  exists  nowhere  any  person  willing 
to  wait  a  hundred  years  for  what  might  be  had  now.  Nor  is 


308  MODERN   ECONOMIC   TENDENCIES 

it  necessary  to  imagine  any  such  a  mythical  person  in  order 
to  explain  interest. 

For  there  are  to-day  plenty  of  communities  which  regularly 
transfer  capital  from  man  to  man  for  use  upon  a  zero  interest- 
rate.  Within  every  factory,  where  no  one  owns  anything,  is 
one  such  a  community.  Another  such,  yet  where  there  is  plenty 
of  private  ownership  of  appliances,  but  all  persons  owning  about 
equally,  is  the  actual,  normal,  isolated  fishing  or  agricultural 
community,  in  which  interest  upon  loaned  appliances  is  virtually 
unknown.  These  two  sorts  of  actual  community  stand  in 
perennial  refutation  of  the  idea  that,  if  the  Consumer  will 
not  pay  the  interest  demanded  by  the  capitalist,  he  must  forego 
the  enjoyment  of  the  appliance  until  he  may  himself  have  become 
a  capitalist,  paying  disgraceful  as  well  as  onerous  tribute  mean- 
while. 

These  actual  instances  of  communities  enjoying  a  zero  interest- 
rate  also  show  plainly  the  true  nature  of  interest,  by  contrast 
with  what  it  is  not.  Plainly,  interest  can  arise  only  where 
two  conditions  exist,  namely: 

1.  Private  owner ship-in-industry ;  and 

2.  Disparity  in  such  ownership. 

If  wealth  were  all  equally  distributed  no  one  would  draw  any 
interest.  No  one  would  pay  it.  No  one  would  need  to  borrow. 

The  combined  rate  and  bulk  of  interest-payments  in  any  land 
are  an  exact  measure  of  its  disparity  of  wealth.  The  exhortation 
of  the  poor  to  become  rich,  that  they  may  enjoy  what  the  rich 
now  enjoy,  is  puerile  nonsense.  For  if  the  poor  could  and  did 
respond,  and  became  rich,  then  neither  class  could  enjoy  any 
income  of  interest,  dividends  or  profits!  There  would  be  no 
non-capitalists  to  pay  them! 

It  will  be  shown  later  that  interest-payments,  per  capita,  are 
steadily  upon  the  increase  in  the  United  States,  and  have  been 
so  for  a  long  while.  There  is  no  need  of  statistical  proof  to 
show  that  disparity  of  wealth  is  upon  the  increase.  Each  of 
these  evils  augments  the  other. 

Depreciation  under  Commercialism, — But  this  question  as 
to  the  depreciation  and  up-keep  of  capital  is  no  such  an  academic 
matter  as  the  above  debate  might  indicate.  It  is  one  of  the 
vital  practical  issues  of  the  hour.  Now  that  the  railroads  are 
contending  so  vehemently  for  higher  rates,  particularly  upon 
the  nominal  excuse  of  making  good  depreciation,  the  issue  has 


OTHER   FEATURES   OF  INTEREST  309 

become  a  vital  public  one.  Let  us  quote  again  from  the  capi- 
talists themselves,  as  they  testified  under  oath  before  the  Inter- 
state Commerce  Commission  in  1910. 

Mr.  Ripley,  then  president  of  the  Santa  Fe,  says : 

"There  is  hardly  any  railroad  in  this  country  to-day  that 
is  built  as  it  ought  to  be  built,  that  has  the  safety-appliances 
that  it  ought  to  have,  or  that  is  in  the  condition  that  the 
public  interests  require.  ...  Of  course,  we  do  not  like  to 
depreciate  our  own  property,  but  the  best  railroads  in  this 
country  west  of  the  Alleghany  mountains  are  very,  very  far 
short  of  what  they  ought  to  be  to  give  the  service  that  the 
country  requires  and  has  the  right  to  demand,  or  would  have 
the  right  to  demand  if  they  paid  for  it."  (Italics  mine.) 

But  how  does  Mr.  Kipley  reconcile  this  statement  with  the 
testimony  of  Mr.  Gardner,  who  represented  the  Chicago  &  North- 
western and  the  Chicago,  St.  Paul,  Minneapolis  &  Omaha,  both 
of  them  roads  west  of  the  Alleghanies?  For  the  latter  testified 
that  on  eighty-five  millions  of  stock  (the  valuation  of  which, 
we  insist,  had  been  created  by  the  Ultimate  Consumers)  fifty-six 
millions  of  dividends  had  been  paid  out,  and  a  surplus  of  thirty 
millions  more  accumulated  as  the  property  of  the  stockholders, 
by  the  shippers,  in  ten  years !  Yet  this,  of  course,  was  done 
quite  in  addition  to  paying  every  natural  cost  of  transportation 
in  the  form  of  wages,  and,  so  far  as  supplies  were  concerned, 
prices  which  included  similar  dividends  and  surplus  to  a  myriad 
of  outside  corporations  besides! 

Yet,  according  to  Mr.  Ripley,  these  roads  are  still  "very, 
very  far  short  of  what  they  ought  to  be"  as  to  up-keep !  And 
they  are  in  that  condition,  he  openly  states,  because  the  shipper 
has  not  paid  the  cost  of  their  proper  maintenance! 

Here  lies  an  abyss  separating  the  ideas  of  the  commercialist — 
and  the  business-world  will  agree  that  Mr.  Ripley  represents 
them  in  the  broadest  and  best  informed  sense — from  those  of 
the  public  of  Ultimate  Consumers  which  is  far  too  long,  wide 
and  deep  to  be  spanned  by  mere  talk.  There  is  no  compromise. 
The  re-adjustment  of  ideas  to  be  accomplished  here  is  com- 
parable with,  if  not  greater  than,  those  now  (1916)  separating 
the  Teuton  from  the  surrounding  Allies. 

Thus,  also,  Mr.  Park,  of  the  Illinois  Central,  upon  the  same 
point : 


310  MODERN   ECONOMIC   TENDENCIES 

Q.  "The  standard  of  the  road  at  this  time  is  not  all  that 
the  public  demands?" 

A.  "No,  sir;  there  are  a  great  many  things  that  should  be 
done  in  the  interest  of  the  patrons,  both  as  to  industries  and 
the  opening  of  agriculture  and  timber-resources,  and  for  the 
comfort  and  safety  of  the  passengers/'  (Italics  mine.) 

If  this  be  the  present  state  of  the  roads,  after  what  the  public 
has  paid  for  their  operation  and  maintenance,  there  can  be  no 
question  as  to  the  necessity  for  a  radical  change  in  system.  For 
these  corporations,  through  selected  officials  and  figures  under 
oath,  have  told  the  public  commission  representing  the  hundred 
million  Ultimate  Consumers,  who  constitute  the  sole  source  of 
all  funds  whatsoever: 

1.  That  one  of  these  representative  corporations — one  chosen 
among  some  fifty  to  represent  the  rest — is  still  carrying  a  debt 
of  eighty-five  millions  which  it  incurred  originally  because  of 
the  temporary  unproductiveness  of  certain  primitive  appliances, 
and  that  it  still  carries  this  debt  long  after  these  appliances  had 
become  productive,  had  continued  their  productivity  throughout 
a  normal  life  of  usefulness,  and  had  then  mostly  rotted  into 
that  dissolution  which  comes  to  all  things — instead  of  its  be- 
ginning to  cancel  that  debt,  as  in  equity  it  should  have  done, 
as  soon  as  each  appliance  became  productive,  and  finishing  that 
cancellation  long  before  the  appliance  finished  its  usefulness. 

2.  That  during  merely  the  last  ten  years  the  people  have 
paid  for  their  transportation,  in  excess  of  the  full  natural  cost 
of  every  legitimate  item  of  operation  and  up-keep,  as  charged 
in  every  factory-system  in  the  land,  more  than  one  hundred 
per  cent  of  this  eighty-five  millions — and  that  their  payments 
during  the  forty-four  years  preceding  this  last  ten  had  been 
in  like  excess — yet  without  the  public  s  having  acquired  thereby 
an  iota  of  title  to  ownership,  as  a  result  of  all  these  payments! 

3.  That,  even  after  all  these  cash-payments  by  the  people, 
they  have  not  yet  succeeded  in  paying  off  a  single  dollar  of  the 
original  indebtedness,  incurred  for  these  long-ago  temporarily 
unproductive  appliances,  now  gone  the  road  of  ftip  van  Winkle's 
youth;    but,    under    this    insatiable,    irremediable,    insensate 
thralldom  of  debt,  they  must  continue  to  pay  endless  tribute 
thereon,  to  the  third,  fourth  and  fourteenth  generation! 

4.  That,  even  in  addition  to  this  hopeless  present  moment, 


OTHER  FEATURES  OF  INTEREST  311 

the  future  promises  worse;  ior  all  these  huge  payments,  over 
and  above  the  service  returned,  have  not  sufficed  even  to  keep 
the  debt  from  growing.  For  the  road  now  stands  burdened 
with  over  $109,000,000  of  capitalized  debt  in  the  form  of  stock 
and  $176,000,000  of  bonds! 

5.  Yet  that,  on  top  of  all  this  hideous  disregard  of  the  sacred 
property-rights  of  the  people  to  the  money  in  their  pockets, 
there  still  remain  undone  "a  great  many  things  which  should 
be  done  for  the  comfort  and  safety  of  the  passengers !" 

That,  we  insist,  is  an  official,  yet  frank,  confession  of  mal- 
administration of  public  property,  of  falsity  of  trust  to  the 
Consumer  who  places  his  money  in  the  road's  hands  for  ex- 
penditure, and  of  deliberate  confiscation  of  the  people's  property, 
which  is  bound  to  be  recognized  in  its  very  ugly  true  aspect, 
when  once  the  rising  issue  between  our  commercial  autocracy 
and  true  economic  democracy  has  once  come  to  a  head. 

That  is  the  plain  reason  why  we  have  always  with  us  "the 
railroad  problem."  That  is  why  the  railway-corporations  are 
continually  finding  themselves  "harassed."  For  they  have  em- 
barked upon  a  policy  which  is  quite  untenable,  yet  which  is 
self-accentuating  beyond  their  control.  It  is  carrying  their 
affairs  into  a  hopeless  tangle  of  high  explosives  just  as  in- 
evitably as  that  inherited  by  poor  Louis  XVI  of  France. 

Yet  it  is  not  argued  here  that  the  railways  are  a  whit  worse 
than  other  corporations,  or  than  the  small  businessmen  of  the 
land.  The  policies  and  doctrines  quoted  here  are  merely  fair 
samples  of  all  commercialism. 

When  events  shall  have  marched  their  inexorable  way  to  the 
inevitable  conflict  between  democratic  rights  and  special  privilege 
in  economics,  when  not  only  the  property  of  the  commercialists 
but  also  their  lives  and  homes  are  to  be  tried  before  a  bench 
and  bar  far  more  grim  than  these  accusing  pages,  do  these 
gentlemen  really  expect  an  outraged  people  to  accept  such  state- 
ments as  those  quoted  above,  as  a  basis  for  granting  the  roads  still 
more  money?  Or  even  for  granting  them  pardon  for  egregious 
offense  against  the  state? 

Do  they  expect  the  people,  when  once  awakened  to  the  issue, 
actually  to  believe  that  interest  or  dividends  is  money  paid  for 
the  use  of  appliances  only  while  the  latter  are  temporarily  un- 
productive? Or  that  it  represents  payments  made  by  the  self- 
indulgent  to  the  frugal  and  industrious?  Or  that  it  represents 


312  MODERN   ECONOMIC   TENDENCIES 

present  enjoyment  of  past  labor?  Or  that  it  forms  the  best 
method  of  hiring  somebody  to  maintain  capital  in  a  condition 
fit  for  the  people's  use?  Or  that  what  has  actually  been  done, 
through  the  agency  of  the  commercialists,  in  the  way  of  service, 
has  never  been  fully  paid  for?  Or  that  the  commercial  system 
has  served  to  keep  our  industrial  appliances  in  their  best  state 
for  service  ?  Or,  in  short,  that  the  people  have  not  already  long 
ago,  quite  in  addition  to  meeting  all  natural  costs  of  service 
or  supplies,  actually  bought  the  principal-valuation  of  the  roads, 
and  of  all  other  commercial  properties,  by  those  cash-payments 
of  interest,  dividends,  profits  and  surplus  which,  according  to 
commercialism's  most  erudite  advocate,  alone  created  those  prin- 
cipal-valuations ? 

These  are  truly  the  questions  of  the  day  for  the  average 
businessman;  for  to-morrow  it  will  be  too  late  to  debate.  The 
march  of  events  will  have  been  found  to  have  swept  suddenly 
the  topic  out  of  the  realm  of  public  discussion  and  into  that 
of  prompt  and  drastic  action.  The  bitter  experiences  of  the 
last  five  years  should  have  taught  some  inkling  of  the  uncon- 
trollable way  in  which  events  come  crashing  like  an  avalanche, 
when  once  they  start. 

For  the  above  indictment,  it  is  carefully  to  be  noted,  is  not 
based  upon,  nor  does  it  consist  in,  any  slightest  degree  of  "muck- 
raking"— any  dragging  into  the  open  of  any  secret  chamber 
of  economic  horrors,  or  extreme  abuses,  or  pitiable  human  frail- 
ties. It  has  been  based  only  upon  the  best  which  the  big  cor- 
porations officially  find  to  offer  for  themselves.  It  has  been 
stated  that  these  big  corporations  are  no  worse — only  more 
public — than  the  little,  private  commercialists. 

Nothing  has  been  said,  for  instance,  of  such  inevitable  in- 
stances of  the  fall  of  human  nature  before  the  temptations  of 
the  commercial  system  as  are  visible  in  the  notorious  histories 
of  the  Erie  and  the  Pacific  roads  in  the  earlier  decades,  or  of 
the  New  Haven  or  Kock  Island  in  recent  ones.  Out  of  the 
fifty  roads  concerned  directly  in  the  hearing  mentioned  the 
statements  quoted  come  only  from  those  selected  by  the  roads 
themselves.  Out  of  five  volumes  of  such  testimony  in  this  single 
hearing  we  have  quoted  from  but  one.  It  is  not  the  worst  which 
the  commercial  system  produces,  but  the  very  best,  which  is 
evil  enough  to  condemn  it  beyond  reprieve  or  pardon. 


OTHER   FEATURES   OF  INTEREST  313 

The  Reaction  of  Commercialism  upon  Standards  of  Hon- 
esty.— Yet  it  would  be  distinctly  unfair  to  our  own  side  of  the 
argument  if  it  were  not  mentioned  that  it  is  humanly  inevitable 
that  the  commercial  administration  of  economic  properties 
should  occasionally  become,  locally  and  temporarily,  far  worse 
than  the  above.  Thus,  as  a  straw  to  indicate  the  wind,  read 
the  following  editorial  from  the  Railway-Age  Gazette,  America's 
prominent  engineering  periodical  devoted  to  the  railways,  and 
one  of  the  most  conservative  and  able  among  our  technical 
journals,  in  its  issue  for  May  29,  1914: 

"The  New  Haven  road  is  not  the  only  one  which  has  been 
Mellenized,1  and  such  revelations  as  have  been  made  regarding 
the  financial  management  of  some  roads  are  enough  to  shake 
public  confidence  in  railroad  management  in  this  country. 
The  situation  is  worse  than  that.  They  are  enough  to  shake 
the  foundations  of  the  confidence  of  the  people  of  this  and 
other  countries  in  the  financial  management  of  all  kinds  of 
business  concerns  in  America;  for  the  men  directly  or  in- 
directly responsible  for  the  mismanagement  of  railroads  are 
as  largely  interested  and  as  potent  in  manufacturing,  mining 
and  other  industries  as  they  are  in  the  railroad  business.  .  .  . 
Certainly  when  railroads  can  be  Mellenized  there  is  need 
either  for  new  legislation,  or  for  the  enforcement  of  existing 
laws,  or  for  both.  The  great  danger  is  that  the  disclosures 
regarding  the  conduct  of  the  Mellens,  the  Yoakums  and  the 
rest  of  their  ilk,  will  cause  the  passage  of  more  radical  legisla- 
tion than  the  conditions  justify.  If  excessively  drastic  legis- 
lation shall  be  passed  we  trust  that  there  will  be  no 
hypocritical  wailing  from  Wall  Street  about  ignorant  public 
hostility  toward  railways  and  about  the  public  being  led  by 
demagogues.  The  buccaneers  in  Wall  Street,  and  the  fools 
and  cowards  in  Wall  Street  who  will  let  the  buccaneers  work 
their  wills,  are  the  chief  authors  of  such  legislation.  It  is 
a  toss-up  whether  the  demagogues  or  the  highbinders  of 
finance  are  doing  the  more  to  bring  all  the  details  of  business 
under  the  regulation  of  public  officials.  Eugene  V.  Debs, 
Morris  Hillquit  and  Upton  Sinclair  think  that  they  are  the 
real  leaders  of  the  socialist  movement  in  this  country.  They 
take  themselves  too  seriously.  The  real  leaders  of  socialism 
are  such  men  as  Charles  S.  Mellen,  B.  F.  Yoakum  and  the 
directors  of  the  New  Haven,  'Frisco  and  other  roads  who  are 

.  Mellen  was  then  president  of  the  N.  Y.,  N.  H.  &  H.  E.  B. 


314  MODERN   ECONOMIC   TENDENCIES 

too  crooked,  cowardly,  indolent  or  incapable  to  perform  the 
duties  of  their  positions."     (Italics  mine.)2 

In  preliminary  support  of  that  fact  of  American  history  which 
is  to  figure  most  prominently  in  our  later  analysis  thereof, 
namely,  that  the  country  is,  and  long  has  been,  suffering  from  a 
steady  growth  of  commercial  militarism  at  the  expense  of  our 
productive  system — by  a  tidal  drift  of  population  from  produc- 
tive into  commercially  combative  occupations — the  following 
editorial  is  quoted  from  the  same  journal,  of  two  weeks  later : 

"It  is  a  remarkable  fact  that  most  of  the  offenses  against 
law  and  good  morals  that  are  committed  in  connection  with 
the  management  of  railways  are  committed  in  their  financing, 
and  that  in  most  cases  those  who  commit  them  are  men  who 
have  made  their  money  as  bankers,  manufacturers  or  mine- 
operators  and  have  broken  into  railway  boards  of  directors  for 
the  apparent  purpose  of  exploiting  the  roads.  In  almost  every 
case  the  railways  whose  finances  as  well  as  their  operation  are 
directed  by  men  who  have  come  up  in  the  railway-service  are 
not  only  efficiently,  but  also  honestly,  managed.  It  is  curious 
that  this  fact  is  overlooked,  and  that  the  very  classes  of  busi- 
nessmen from  which  the  wolves  that  ravage  the  railways  come 
are  among  the  loudest  in  their  lamentations  regarding  the 
way  the  railways  are  mismanaged." 

In  this  connection  it  is  to  be  noted  that  Mellen,  in  a  full-page 
statement  in  the  New  York  Times  for  May  20,  1914,  admitted 
that  his  orders  came  from  the  late  J.  P.  Morgan.  What  may  have 
been  the  character  of  these  orders,  and  the  ideas  as  to  capitaliza- 
tion on  which  they  were  based,  may  be  inferred  from  the  follow- 
ing report  of  Mr.  Mellen's  views  appearing  in  the  Railway- Age 
Gazette  for  Nov.  14,  1913 : 

"Mr.  Morgan's  offer  of  $20,000,000  was  for  the  stock  of  the 
New  England  Navigation  Company,  which  cost  us  less  than 
$6,000,000.  .  .  .  The  railroads  will  all  go  under  government 
ownership.  It  is  coming  quickly.  Five  years  ago  I  felt  that 

1  should  not  live  to  see  it.    But  now  I  think  I  shall.    Eegula- 

2  Mr.  Yoakum  was  then  president  of  the  C.,  C.,  C.  &  St.  L.  E.  B.    The 
author  requests  any  reader  who  regards  this  book  as  radical  to  compare 
the  most  extreme  language  found  between  its  covers  with  this  outburst 
of  righteous  indignation  on  the  part  of  the  conservative  technical  press. 


OTHER   FEATURES  OP   INTEREST  315 

tion  by  the  government  during  the  last  ten  years  has  tended  to 
lower  the  value  of  railroad  stocks  as  investments.  There  is 
not  the  big  money  in  railroads  that  there  used  to  be.  There 
will  not  be  any  opposition  to  government  ownership  when  the 
time  arrives,  because  private  capital  will  find  the  field  unprofit- 
able as  a  result  of  the  too  strict  regulation." 

But  these  warnings,  as  usual,  fell  upon  deaf  ears.  Within  a 
year  it  had  become  the  Rock  Island  road  which  had  come  into 
the  limelight,  as  the  latest  candidate  for  public  condemnation. 
Its  stock  had  fallen  in  fourteen  years  from  $207  to  $18,  and  on 
April  20,  1915,  it  passed  into  the  hands  of  a  receiver.  Regarding 
this  little  incident  the  New  York  Times  said : 

"Indignation  over  the  unexpected  turn  in  Rock  Island  affairs 
was  voiced  by  many.  There  were  many  things  to  be  explained, 
brokers  and  bankers  said.  Many  persons  had  been  grossly 
deceived,  they  held,  while  a  few  favorites  had  been  apprised 
in  time  to  escape  the  calamity.  Particular  indignation  was 
expressed  that  A.  F.  van  Hall,  the  Amsterdam  banker  who 
spent  twelve  weeks  in  this  country  in  the  interest  of  Dutch 
holders  of  86,000  shares  of  Rock  Island,  should  have  been 
allowed  to  sail  for  Holland  without  any  intimation  of  the 
reverses  for  the  company  in  which  his  clients  were  interested. 
Mr.  van  Hall's  ship  had  not  cleared  the  lower  Hudson  when 
the  news  of  the  receivership  came  over  the  ticker  from 
Chicago/' 

It  is  plain  that  this  commercial  economic  organization  of  ours, 
despite  the  width  of  its  distribution  of  stocks  and  bonds,  is  no 
democracy  at  all,  but  an  irresponsible  oligarchy,  in  which  the 
small  stockholder  suffers  almost  as  helplessly  as  the  Consumer. 
For  the  item  just  quoted  is  merely  the  one  coming  to  hand  most 
conveniently  in  the  daily  press,  representative  of  what  has  been 
prevalent  ever  since  the  Civil  War,  but  with  frequency  and  size 
accelerated  since  the  boom  in  commercialism  aroused  by  the 
Cuban  War  of  1898. 

Stock- watering. — In  the  above  indictment  of  capitalism  little 
has  been  said  about  watered  stock.  This  is  because  the  question 
of  deliberate  stock-watering  must  appear,  after  what  has  already 
been  said,  as  a  matter  quite  irrelevant  to  the  public  interests. 
Whether  interest-bearing  securities  be  originally  water  or  not 
makes  no  appreciable  difference  to  the  public,  so  long  as  there  is 


316  MODERN   ECONOMIC   TENDENCIES 

no  idea  of  retiring  them,  without  refunding,  as  fast  as  the  suc- 
cess of  the  enterprise  permits,  and  faster  than  the  appliances 
depreciate  with  use  and  time. 

What  difference  does  it  make  whether  the  appliances  be  there 
or  not,  so  long  as  the  real  policy  is  to  issue  securities  at  a  volume 
and  a  rate  of  interest  always  openly  adjusted  to  the  maximum 
which  "the  traffic  will  bear"?  What  difference  does  it  make 
whether  a  corporation  about  to  invest  half  a  million  dollars  in 
appliances  issues  stock  of  nominally  one  million,  paying  six  per 
cent,  and  therefore  standing  at  about  par,  or  two  millions  paying 
three  per  cent,  and  therefore  standing  at  fifty  ?  The  two  millions 
will  soon  be  paying  six  per  cent,  and  therefore  worth  two 
millions,  or  the  one  million  will  soon  be  paying  twelve,  and 
therefore  worth  two  millions. 

In  either  case  the  stock  has  become  by  that  time  three-quarters 
water.  In  either  case  the  appliances  will  have  rotted,  worn  out 
or  become  obsolete  inside  of  twenty  years,  and  then  the  stock 
will  have  become  all  water,  whatever  may  have  been  its  original 
face-value  or  its  present  valuation! 

Yet  this  valuation,  in  the  majority  of  cases,  even  after  reaching 
this  point  of  being  all  water,  will  still  go  on  increasing 
indefinitely  thereafter — either  by  market-appreciation,  if  the 
face-value  has  remained  unaltered,  or  by  refunding  to  a  larger 
face-value,  in  order  to  keep  down  the  apparent  rate  of  interest 
or  dividends.  Whether  the  stock  were  originally  half  water  or 
the  appliances  are  now  all  rust  and  dust,  makes  no  difference  to 
the  Consumer.  The  price  of  service  continues  to  rise,  just  the 
same. 

Dividends  on  Dead  Horses. — Thus  an  anonymous  writer  in 
the  Philadelphia  Public  Ledger  of  May  20,  1918,  relieves  his 
feelings  in  regard  to  the  local  street-car  situation  by  a  plaint 
concerning  the  "Perpetual  Dividends  on  the  Souls  of  Dead 
Horses,"  as  follows : 

"Just  think  of  it !  Horses  that  in  life  paid  for  themselves 
many  times  over  and  really  earned  the  right  to  rest  eternal  in 
the  equine  elysium.  .  .  .  With  what  kindness,  with  what 
tender  care,  with  what  constancy  they  [the  corporation- 
officials]  watered  the  stock !  Almost  at  the  end  of  every 
round-trip !  The  horses  may  lie  a-mouldering  in  the  grave 
for  sixty  years  past  or  more,  but  their  souls  go  marching  on. 


OTHER  FEATURES   OF   INTEREST  317 

They  go  on  collecting  72  per  cent  per  year,  not  on  their 
mortuary  value,  but  on  their  alleged  original  cost." 

The  whole  modern  system  of  capitalism  rests  upon  the  growth 
of  tribute-power  based  upon  original  investments  made,  if  ever, 
two  or  three  generations  ago.  And  three  generations  hence  will 
find  our  great-grandchildren  still  burdened  with  this  same  in- 
debtedness to  the  kind  capitalist  as  now,  or  a  greater  one,  for 
appliances  bought  before  the  Civil  War,  used  while  Garfield 
was  president,  and  rotted  before  this  present  century  opened! 

They  will  then  still  be  paying  this  never-ending  stream  of 
interest  upon  a  debt  which  is  zealously  preserved  from  being 
paid — and  the  nature  of  interest  will  still  be  explained,  to  our 
youth  then  enjoying  a  university-education,  as  a  necessary  balm 
for  the  delayed  enjoyment  of  the  principal  on  the  part  of  those 
whose  bones  will  then  have  been  mouldering  for  four  generations ! 
The  furthest  posterity  of  these  capitalists  of  Buchanan's  day 
(should  commercialism  continue  to  survive)  will  then  be  as 
deeply  hurt  as  a  German  is  by  treaty-breaking,  at  any  suggestion 
that  the  debt  should  be  finally  paid  and  the  balm-spigot  shut  off 
forever. 

Recent  Expansion  of  Capitalizations. — Up  to  the  close  of 
the  nineteenth  century  the  general  industrial  system  of  the  coun- 
try had  adhered  fairly  religiously,  in  spite  of  exceptions,  to  the 
principle  of  paying  interest  or  divide  ds  only  upon  the  actual 
investment  in  appliances ;  and  while  the  inequity  of  interest  was 
then  just  as  pure  in  kind,  it  was  much  less  in  degree.  Eailroad 
and  mining  stocks  had  always  been  unquestioned  exceptions  to 
this  rule,  it  is  true,  because  of  the  element  of  gambling  which 
had  entered  necessarily  into  these  fields  of  investment.  But  the 
bulk  of  all  industrial  enterprises  were  financed  conservatively. 

But  late  in  the  century  there  arose  in  financial  circles  the 
practice  of  rapid  consolidation,  with  the  accompanying  issue  of 
large  volumes  of  interest-bearing  securities.  "What  the  traffic 
would  bear"  in  this  direction  was  now  determined  by  speculative 
trading  in  these  securities  on  the  exchanges,  where  such  paper 
had  rarely,  if  ever,  been  seen  before.  It  was  this  practice  which 
had  already  resulted,  long  before  the  truly  modern  rate  of 
progress  had  been  reached,  in  the  enactment  of  the  so-called 
Sherman  anti-trust  law  of  1890. 

By  the  opening  of  the  twentieth  century  the  commercial  boom 


318  MODERN   ECONOMIC  TENDENCIES 

resultant  from  the  Spanish  War  had  brought  all  industrials  into 
this  field.  In  1901  the  United  States  Steel  Corporation  was 
formed,  with  a  gross  capitalization  in  the  hundreds  of  millions, 
from  component  plants  whose  capitalization  aggregated  but  a 
fraction  of  that  amount;  and  much  even  of  that  original  stock 
was  surely  inflated.  Because  of  the  complication  of  many  plants 
and  subsidiary  companies  the  exact  figures  are  difficult  to  deter- 
mine; but  the  New  York  Times  for  Oct.  27,  1911,  in  reporting 
the  suit  brought  at  about  that  time  to  dissolve  the  Steel  Cor- 
poration, under  the  anti-trust  law,  makes  the  following  state- 
ment: 

"At  the  time  of  its  organization  the  corporation  had,  in 
round  numbers,  $510,000,000  of  7  per  cent  cumulative  pre- 
ferred stock  and  $508,000,000  of  common  stock,  $303,000,000 
of  its  own  bonds  and  about  $81,000,000  of  the  bonds  of  its 
subsidiaries  and  other  obligations— a  total  of  $1,4.02,000,000." 

Incorporation  upon  such  a  magnitude  as  that  had  never 
before  been  known.  From  that  time  forward  a  pace  was  set  in 
the  rapid  expansion  of  capitalization  which  alarmed  even  such  a 
hardened  financial  veteran  as  Eussell  Sage,  whose  protest  against 
it  was  quoted  in  the  chapter  on  Credit. 

But,  in  spite  of  forebodings,  the  negotiations  for  the  "placing" 
of  this  flood  of  new  securities  proved  always  to  be  most  profitable, 
and  the  dividends  paid  generally  justified  the  investor.  Thus, 
on  Feb.  18,  1915,  the  Times  reports  the  drawing  of  "the  biggest 
check  ever  paid,"  for  $49,098,000,  in  payment  for  Pennsylvania 
Kailroad  bonds.  The  profits  on  this  sale  were  reported  as  being 
$1,715,000,  and  a  certain  syndicate  was  said  to  have  made  on  this 
deal  "$980,000  without  a  dollar  up." 

These  incidents  mentioned  here  are  but  straws  indicating  the 
wind.  Although  the  recent  New  Haven  fiasco  stirred  all  New 
England,  where  the  stock  was  widely  held  by  widows  and  profes- 
sional men,  yet  in  the  West,  where  Eock  Island  and  Missouri 
Pacific  interest  people  more,  it  was  but  little  noticed.  No  one 
of  these  outrageous  proceedings  affects  enough  people  simul- 
taneously to  arouse  competent  revolt.  No  one  knows  how  to 
revolt  effectively.  So  long  as  they  affect  only  stockholders  or 
"lambs"  (who  are  anybody's  meat)  they  will  never  be  appre- 
ciated by  public  opinion  as  a  whole.  The  bulk  of  these  happenings 
scarcely  win  double  headlines  in  the  daily  press. 


OTHER  FEATURES   OF   INTEREST  319 

Normal  Commercialism. — These  frequent  obvious  swindles 
upon  a  gigantic  scale  do  not  represent  abuses,  it  must  be  carefully 
noted,  nor  monstrosities,  in  the  commercial  world,  but  merely  the 
normal  philosophy  of  the  commercialists  towards  the  public  of 
Consumers,  developed  into  a  magnitude  where  it  becomes  con- 
spicuous. Every  petty  commercialist  is  doing  the  same  thing 
upon  his  piffling  scale.  Modern  discontent  rests  not  upon 
merely  occasional  abuse  of  a  good  system,  but  upon  the  inherent 
falsity  and  inefficiency  of  a  policy  the  daily  workings  of  which 
permeate  all  society,  in  every  land  where  money,  exchange,  bar- 
gaining, investment  and  speculation  prevail  in  fair  freedom. 
God  help  the  world  when  the  remorseless  course  of  events  has 
brought  things  to  the  point  where  the  entire  people  perceive  this 
falsity  simultaneously ;  but  too  late  for  rational  remedy ! 

For  it  is  not  the  ideal,  proposed  systems  of  society  which 
necessarily  demand  some  strange,  angelic  brand  of  human  nature 
to  make  them  practicable,  as  is  so  commonly  said.  It  is  the 
present  commercial  system  which  requires  the  impossible.  In- 
deed, our  present  view  of  human  nature  as  a  frail  thing,  pre- 
destined to  sin,  must  be  largely  due  to  the  fact  that  we  see  it 
at  work  always  under  a  system  which,  while  pretending  only  to 
strain  it  "all  it  will  bear,"  in  actuality  always  loads  it  until  its 
activities  have  been  sagged  to  one-fifth  of  normal,  putting  upon 
mankind  a  pressure  which  distorts  its  opportunities  into  temp- 
tations far  beyond  its  powers  of  endurance. 

Because  interest  and  profits  are  institutions  essentially  in- 
equitable, and  because  we  have  made  them  a  prerequisite  to 
industry,  therefore  inevitably  the  control  of  modern  enterprise 
is  drifting  away  from  honest,  scrupulous  methods  into  those 
condemned  so  unsparingly  by  the  Railway-Age  Gazette.  This 
tendency  parallels  to  a  startling  degree,  for  instance,  the  drift  of 
control  of  both  politics  and  economics  in  France,  in  the  seven- 
teen-eighties,  into  the  hands  of  the  most  unscrupulous  of  the 
aristocracy.  It  parallels  the  growth  in  power  of  the  most 
uncompromising  advocates  of  slavery  in  the  American  South 
in  the  eighteen-fifties,  or  that  of  the  most  extreme  militarists 
in  modern  Germany. 

If  it  should  ultimately  develop  that  the  far-distant  guillotine 
of  1793  spreads  across  the  modern  director's  table  a  shadow  look- 
ing wondrously  like  a  dynamite-bomb,  that  the  outlines  of  Wall- 
Street  and  the  Fifth-Avenue  skyscrapers  melt  indistinguish- 


320  MODERN   ECONOMIC  TENDENCIES 

ably  into  those  of  the  Tuilleries,  and  that  the  courteous  question- 
ings of  the  Interstate  Commerce  Commission  both  echo  and 
foretell  strangely  the  sterner  tones  of  the  Parisian  Committee  of 
Public  Safety — announcing  its  daily  consignment  to  the  tumbrils 
of  those  who  had  done  nothing  worse  than  to  hold  on  to  special 
privilege  just  a  bit  too  long — it  should  not  be  considered  strange. 
If  this  should  come,  the  responsibility  for  its  coming  has  been 
rightly  placed,  in  part,  by  the  Railway-Age  Gazette. 

Summary. — In  order  to  summarize  all  which  has  been  debated 
above  as  to  the  nature  of  interest,  let  us  list  the  conditions  under 
which,  in  the  name  of  the  most  ordinary  sense  of  justice  and 
equity,  the  bargain-aspect  of  interest  which  forms  the  basis  for 
Fisher's  commercial  theory,  might  constitute  a  bargain  approach- 
ing fairness,  whether  to  the  two  individuals  active  therein  or  to 
the  community  of  Consumers.  And  secondly,  let  us  inquire 
whether  these  conditions  now  prevail  in  the  actual  commercial 
world. 

These  conditions  are  at  least  six  in  number,  namely : 

I.  Society  must  actually  owe  to  the  capitalist  himself  the 
existence  of  the  appliances  or  facilities  in  question,  access  to 
which  is  denied  the  Consumer  except  upon  the  payment  of 
interest,  either 

a.  Because  the  capitalist  was  their  inventor,  or 

b.  Because  he  was  their  creator  by  productive  labor,  or 

c.  Because  they  represent  frugality  on  the  part  of  the  capitalist 
in  comparison  with  the  spendthrift  luxury  of  the  average  non- 
capitalist  Consumer. 

II.  The  loan  of  the  capital  must  be  really  needed  by  the 
borrower,  whose  payment  of  interest  thereon  must  be  voluntary — 
rather  than  the  loan  executed  without  the  wish  of  the  borrower, 
solely  for  the  sake  of  enforcing  the  payment  of  interest. 

III.  The  two  parties  to  the  bargain  must  be  individuals,  in 
order  that  the  balance  of  their  powers  in  bargaining  may  even 
approach  equity. 

IV.  The  loan  must  be  inevitable,  as  being  the  only  or  the  best 
means  known  to  society  for  connecting  the  workman  engaged 
upon  temporarily  unproductive  tasks  with  his  necessary  supply 
of  immediately  consumable  commodities. 

V.  The  loan  and  the  payment  of  interest  thereon  must  be 
limited   to   the  period  of  temporary   unproductiveness   of   the 
enterprise  in  question,  its  first  productivity  being  devoted  to  the 


OTHER  FEATURES  OF  INTEREST  321 

cancellation  of  the  loan  and  the  cessation  of  interest-payments. 

VI.  The  loan  must  concern  appliances  useful  to  the  public 
good  and  the  life-support  of  the  Consumer.  Eeference  is  not  had 
here  to  watered  stock,  which  we  have  seen  is  a  question  im- 
material to  the  Consumer,  but  to  investment  in  various 
appliances  and  activities  familiar  to  commercial  competition 
which  accomplish  nothing  of  any  value  whatever  to  the  Ultimate 
Consumer  yet  which  exact  remorseless  tribute  from  him. 

Query, — Do  all  of  these  essential  conditions,  or  even  any  one 
of  them,  prevail  in  the  actual  commercial  world  of  to-day?  We 
shall  show  that  not  one  of  them  does  so.  Still  less  can  it  be 
said  that  commercialism  is  supported  by  simultaneous  innocence 
upon  all  these  charges  against  it. 

la.  Is  Interest  due  the  Capitalist  because  he  Invents?  This 
would  seem  a  silly  question  if  it  were  not  for  the  fact  that  the 
allegation  is  constantly  met,  and  from  college-bred  businessmen 
too,  that  the  capitalist  "got  up"  this  or  that  property  or  enter- 
prise, and  hence  has  a  right  to  anything  he  may  be  able  to 
extort  from  society  for  its  use. 

The  reply  to  this  question  is  to  remind  every  reader  that 
careful  distinction  must  be  maintained  between  invention  and 
capitalism.  So  far  as  invention  is  concerned,  that  is  a  purely 
productive  process  which,  because  of  its  peculiar  nature — inde- 
pendence between  time  invested  and  result  produced,  together 
with  novelty — has  had  its  wages  awarded  to  it  through  a  peculiar 
system  of  monopoly-fee  known  as  patent-rights.  But  the  reward 
of  the  inventor  is  none  the  less  pure  wages,  in  that  it  is  received 
for  productive,  as  distinctive  from  combative,  effort. 

The  federal  statutes  have  carefully  distinguished  that  which 
is  patentable  (because  of  novel  value  to  the  public)  and  that 
which  is  not.  None  of  these  commercial  enterprises  which  de- 
mand dividends  so  relentlessly  is  patentable. 

Moreover,  the  inventor's  privilege  of  tribute  ends  in  seventeen 
years,  whereas  the  capitalist's  privilege  of  collecting  interest  is 
endless. 

It  must  be  plain  that,  just  because  some  man  happens  to  com- 
bine the  functions  of  inventor  and  capitalist  within  a  single 
individual,  his  reward  as  one  cannot  be  bolstered  by  nor  confused 
with  his  worth  as  the  other.  Assuming  that  the  patent-system 
does  accord  to  the  inventor  his  proper  return,  the  capitalist  part 
of  this  man  can  claim  no  reward  upon  that  same  basis  also. 


322  MODERN   ECONOMIC   TENDENCIES 

But  as  a  matter  of  fact,  without  attempting  to  debate  here  the 
equities  or  inequities  of  the  patent-system,  it  may  be  stated 
incidentally,  as  from  one  whose  vocation  is  patent-litigation, 
that  the  penetration  of  commercialism  into  that  system,  in  the 
negotiability  of  patents,  quite  robs  the  inventor  of  his  natural 
rights.  If  the  inventor  happens  also  to  be  a  good  businessman, 
he  wins;  but  otherwise  the  bulk  of  his  rights  are  either  lost 
directly  to  some  abler  businessman,  or  else  are  swamped  in  a 
struggle  against  those  artificial  obstacles  which  commercial  com- 
petition deliberately  piles  in  the  way  of  every  new  enterprise. 

For  commercial  militarism  regards  any  intruder  into  estab- 
lished incomes,  however  advantageous  to  the  public  the  new- 
comer may  be,  with  the  same  tender  spirit  of  welcome  which  a 
babe  receives  from  a  pack  of  hungry  wolves.  The  bulk  of  all 
investment  of  money  and  energy  currently  needed  for  estab- 
lishing new  inventions  goes  not  at  all  to  experiment,  nor  to 
true  public  education  at  all,  but  to  combat  with  these  wolves.3 

16.  Is  the  Capitalist  the  Creator  of  the  Capital?  Whatever 
may  have  been  the  case  in  some  earlier  prototypes  of  the  modern 
capitalist,  in  this  respect,  certainly  it  does  not  hold  true  now. 
Fully  95  and  probably  99  per  cent  of  all  modern  capitalism  has 
no  connection  whatever  with  saved  and  invested  wages.  It  con- 
sists solely  of  re-invested  profits,  interest,  dividends  and  surplus. 

The  equity  of  secondary  interest  or  dividends  drawn  upon  these 
certainly  cannot  be  based  upon  a  principal  which  embodies  this 
same  question  as  to  the  equity  of  its  ownership.  That  is  vicious 
reasoning  in  a  circle.  And  even  as  to  the  remaining  small  per- 
centage to  which  capitalism  possibly  consists  of  savings  from 
productive  labor,  it  cannot  claim  interest  as  an  equity  based  upon 
that  original  labor,  which  was  fully  recompensed  in  the  original 
wages  paid. 

But  in  some  special  cases  it  seems  impossible  to  avoid  attri- 
buting some  creative  aspect  to  the  activities  of  the  capitalist. 
Take  for  instance  the  case  of  the  late  Mr.  James  J.  Hill,  "the 
builder  of  the  Northwest."  Unquestionably  he  did  an  enormous 
amount  of  constructive  work. 

But  no  one  begrudges  him  the  most  generous  recompense  for 
all  such  work,  if  paid  in  the  form  of  wages  or  salary.  His 

3  In  tvrelve  years '  experience  in  patent-litigation  the  author  recalls 
only  two  cases  wherein  the  inventor  appeared  as  an  interested  party, 
even  to  minor  degree. 


OTHER   FEATURES   OF  INTEREST  323 

salary  might  have  been  equal  to  that  of  the  president  of  the 
United  States,  if  paid  for  work  jealously  guarded  from  every 
waste  of  effort  in  combat,  and  if  no  interest  were  paid  thereon ; 
yet  there  would  be  no  inequity. 

But  neither  of  these  conditions  was  observed.  Mr.  Hill 
received  no  salary  at  all  for  much  of  his  constructive  work, 
while  society  permitted  him  to  be  both  tempted  and  forced  to 
waste  the  bulk  of  his  time  and  genius  in  commercial  combat  of 
a  silly  and  tragic  sort;  and  for  this  he  was  permitted  ultimately 
to  reimburse  himself  at  the  public  expense  by  sums  of  which  no 
accounting  whatever  was  even  requested. 

Finally,  society  was  so  silly  as  to  leave  the  situation  with  him 
holding  an  endless  title  to,  or  hereditary  lien  upon,  the  territory 
which  he  had  helped  to  develop,  for  interminable  future  tribute 
in  the  form  of  interest,  such  as  constituted  Mr.  Hill  a  veritable 
feudal  seigneur.  For  indeed  he  had  won  this  hereditary  title 
to  tribute  as  purely  by  right  of  conquest  as  ever  feudal  lord  won 
his  baronetcy. 

But  why  should  the  American  people,  which  is  so  proud  of  its 
efficiency,  ever  do  so  silly  and  inefficient  a  thing  as  to  force  Mr. 
Hill  to  waste  three-quarters  of  his  energy  in  righting  for  a 
chance  to  work  ?  Why  could  it  not  expect  him  to  be  as  efficient 
a  pioneer,  upon  the  same  sort  of  pay,  as  were  his  predecessors  in 
the  development  of  the  Northwest,  Messrs.  Lewis  and  Clark? 

Those  pioneers  encountered  from  the  savage  denizens  of  un- 
broken wilderness  no  such  effective  antagonism  to  progress  as 
Mr.  Hill  encountered  from  his  "civilized"  commercial  com- 
petitors. The  difference  between  these  two  instances  shows  at  a 
glance  the  form  of  our  social-economic  evolution  during  the  last 
century. 

Ic.  Is  the  Equity  of  Interest  Defensible  upon  the  Ground  of 
the  Relative  Frugality  of  the  Capitalist  over  the  Interest-payer: 
The  Ultimate  Consumer?  The  reader  will  not  be  insulted  by 
argument  upon  this  question.  Yet  it  states  merely  what  is  heard 
almost  daily  from  the  "man  in  the  street"  by  anyone  who  attacks 
capitalism.  We  have  seen  that  it  has  the  sanction  of  Professor 
Fisher,  of  Yale. 

II.  7s  the  Payment  of  Interest  or  Dividends  ly  the  Consumer 
a  Voluntary  Bargain?  Never!  The  bulk  of  all  capitalism  is 
foisted  upon  the  public  without  even  any  pretense  of  obtaining 
its  consent — except  to  test  whether  the  traffic,  either  in  securities 


824  MODERN   ECONOMIC   TENDENCIES 

or  commodities,  will  sag  too  far  under  each  new  burden  to  make 
it  a  profitable  one. 

The  first  aim  of  every  businessman,  large  or  small,  is  to  expand 
the  volume  of  interest-bearing  debt.  The  opportunity  for  loans 
at  interest  is  not  sought  by  him  who  pays  the  interest,  but  by  him 
who  receives  it.  This  is  true  whether  it  concerns  a  franchise  for 
a  new  public-service  corporation,  a  new  factory  or  an  additional 
corner-grocery. 

As  Mr.  Eipley,  of  the  Santa  Fe,  says: 

"It  is  very  important,  I  think,  that  railroad-credit  should 
be  maintained  in  order  to  afford  opportunities  for  investment/' 
(Italics  mine.) 

Here  Mr.  Ripley's  clear  insight  and  frank  speech  again  reveal 
the  essence  of  commercialism.  This  universal  commercial  desire 
for — this  insistence  upon — opportunity  for  investment,  as  if  it 
were  a  basic  right  of  the  commercial  world,  even  when  palpably 
antagonistic  to  public  interests,  is  destined  to  form  one  of  the 
two  pivots  upon  which  whirls  the  re-adjustment  process  which 
is  to  abolish  all  commercialism.  It  is  when  so  great  a  burden  of 
these  has  been  issued  that  the  Consumers  can  no  longer  pay 
interest  thereon,  so  that  all  collapse  together,  and  not  before  then, 
that  the  whirlwinds  of  economic  revolution  will  have  been 
unloosed. 

Nor  need  these  "issues,"  in  order  to  be  effective,  be  engraved 
by  a  bank-note  company  and  floated  in  Wall  Street.  Suppose,  for 
illustration,  that  an  additional  grocery-store  is  started  in  the 
district  serving  my  home.  Herein  is  an  expansion  of  the  capi- 
talism engaged  in  supplying  me  with  food — a  "loan"  to  me  of 
stock  and  fixtures;  and,  according  to  Professor  Fisher,  I  pay 
interest  upon  this  investment  because,  as  a  free  bargain,  I 
prefer  to  do  that  rather  than  to  forego  a  regular  supply  of 
groceries  until  I  can  accumulate,  by  my  own  surplus  productive 
effort,  such  a  stock  and  appurtenances  of  my  own! 

The  suggestion  is  too  absurd  to  be  worthy  of  serious  debate. 
The  additional  store  is  not  needed.  My  wishes  in  the  matter 
were  not  consulted  in  the  slightest.  There  is  not  a  ghost  of  a 
"bargain"  involved. 

There  are  plenty  of  stores  already  there.  //  they  are  poor, 
make  them  letter;  don't  duplicate  them.  No  gain  to  society, 


OTHER   FEATURES   OF  INTEREST  325 

but  a  loss,  has  been  accomplished  by  the  seventh  store,  where  the 
six  already  there  were  five  too  many. 

Yet  upon  every  dollar  of  capitalism  in  that  new  store  I  must 
pay  interest,  whether  1  trade  there  or  not.  For  my  own  purveyor 
will  lose  some  trade  to  the  newcomer,  and  so  will  be  forced  to 
figure  his  fixed  charges  upon  a  smaller  volume  of  business  than 
before — or,  in  other  words,  raise  his  prices. 

This  is,  in  a  nutshell,  our  whole  recent  economic  evolution. 
Prices  are  rising  because  a  larger  number  of  competing  sellers, 
per  capita  of  consumer,  are  continually  crowding  into  every  line 
of  trade. 

If  I  had  been  consulted  in  this  matter,  as  by  law,  I  should  be 
required  to  be  (if  we  had  a  natural  or  just  economic  system),  I 
would  have  said : 

"No.  There  are  already  six  stores  serving  my  street,  which 
is  just  five  too  many — five  more  than  any  businessman  would 
permit,  were  he  appointed  to  operate  the  community's  food- 
supply  as  he  does  his  own  factory.  Interest  is  charged  up,  as 
a  'cost  of  doing  business/  on  all  six  stocks.  But  the  volume 
of  trade  which  is  passing  through  the  six  stores  is  only  that 
which  one  could  handle  easily,  if  the  other  five  were  prevented 
from  butting  in. 

"No.  Let  the  proper  authorities — my  economic  rather  than 
my  political  representatives — start  a  single  store,  collecting 
from  me  and  my  fellow- Consumers  the  requisite  capital,  place 
a  salaried  man  in  charge,  with  complete  monopoly  of  all  the 
trade  in  the  district — no  competing  store  being  allowed,  any 
more  than  we  allow  a  competing  post-office — and  then  see  to 
it  that  every  atom  of  food  becomes  the  property  of  the  Con- 
sumers-in-aggregate  from  the  instant  it  enters  the  city-limits. 

"From  that  start  let  the  facilities  be  built  up  properly,  by 
the  accumulation  of  a  surplus  out  of  daily  receipts,  just  as  is 
done  in  every  business,  except  that  that  surplus  and  the 
appliances  bought  from  it  belong  to  me,  until  they  wear  out 
or  rot.  And  equally  they  belong  to  every  other  Consumer, 
young  or  old,  industrious  or  lazy ;  because  he  will  partake  of 
their  value  only  as  he  buys.  No  one  need  ask  him  the  origin 
of  his  money.  It  is  as  he  spends  it  that  he  becomes  an  elective 
citizen  of  the  economic  world." 

Under  such  a  system  as  that  I  can  well  afford  to  forego  every 
oent  of  interest  which  I  might  conceivably  have  drawn  upon  my 


326  MODERN  ECONOMIC  TENDENCIES 

capital,  if  invested  under  commercialism — every  bit  of  exclusive 
title  which  I  might  have  acquired  by  going  into  the  provision- 
business — because  of  the  tremendously  better  bargain  I  now 
would  get  every  time  I  passed  a  dollar  across  the  shop-counter. 
I  can  well  afford  to  present  gratis  to  every  later  comer  into  my 
district,  whether  by  birth  or  by  immigration,  full  enjoyment  of 
the  facilities  which  have  been  built  up  on  money  coming  from 
my  purchases,  because  I  avoid  the  inconceivable  expense  and  in- 
convenience entailed  by  the  antagonism  set  loose  by  anybody's 
trying  to  call  those  facilities  "mine." 

In  comparison  with  any  such  an  orderly,  equitable,  factory- 
system  of  retail-supply  as  that,  the  present  license  for  anyone 
who  has  the  "initiative"  (which  usually  means  that  he  doesn't 
know  what  else  to  do)  to  butt  in  with  an  additional  store,  is 
sheer,  unmitigated  anarchy.  For  anarchy,  as  a  doctrine  or  a 
fact,  means  merely  action  without  law  where  there  should  be  a 
law  to  be  observed. 

Public  Ownership. — In  this  connection  must  be  made  at 
least  bare  mention  of  the  very  large  topic  of  public  ownership, 
to  the  extent  of  covering  its  points  of  contact  with  that  of 
interest;  for  to  many  persons  public  ownership  stands  as  a  ready 
solution  of  all  these  ills.  But,  without  being  misunderstood  as 
broadly  opposing  public  ownership,  it  is  yet  to  be  noted  that  this 
policy — at  least,  in  the  form  which  alone  is  now  legal  and  consti- 
tutional— offers  the  Consumer  no  escape  from  his  burden  of 
interest-payments.  This  is  true  for  these  following  reasons: 

1.  Cities  can  now  acquire  properties  only  by  their  purchase 
with  the  issue  of  interest-bearing  bonds.     Indeed,  this  sort  of 
state-capitalism  now  constitutes  one  of  the  more  important  of 
the  minor  fractions  of  all  capitalism,  and  has  already  aroused 
the  resentment  of  the  socialists. 

The  Consumer,  by  public  ownership,  has  merely  exchanged 
one  form  of  capitalism  for  another.  Indeed,  if  the  former  owner, 
in  selling,  has  accepted  city-bonds  in  payment,  the  capitalist  in 
the  two  cases  may  be  the  ^ame  man. 

2.  The  fact  that  the  city-bond  may  bear  a  lower  rate  of  interest 
does  not  help  the  Consumer,  as  an  interest-payer.    For  the  vol- 
ume of  all  other  forms  of  interest-bearing  security  currently 
issued  is  not  a  fixed  one,  but  expands  indefinitely,  being  limited 
in  size  only  by  the  public's  ability  to  absorb.    Even  if  the  transfer 
of  a  single  property  to  public  ownership  may  have  eased  his 


OTHER   FEATURES   OF   INTEREST  327 

pocket,  capitalism  upon  a  hundred  other  new  projects  will 
promptly  expand  until  it  has  fully  absorbed  the  new  margin  of 
comfort.  This  is  shown  by  the  fact  that  within  a  few  days  the 
"traffic"  will  have  sagged  back  again  to  "all  it  will  bear." 

Every  period  of  panic  or  prosperity  evinces  upon  a  large  scale 
this  process  of  come-and-go  of  security  valuations,  to  follow  the 
interest-paying  capacity  of  the  Consumer.  Every  day's  fluctua- 
tions in  Wall  Street  evinces  it  upon  a  smaller  scale.  The 
expansive  pressure  of  capitalism,  against  the  ability  of  the 
Consumer  to  pay  interest,  is  exerted  equally  all  over  the  com- 
mercial world,  through  a  medium  so  fluid  as  to  exhibit  very  little 
viscosity  in  its  transfer  of  pressure  from  business  to  business,  or 
even  from  land  to  land.  Nothing  can  help  the  Consumer  appre- 
ciably or  permanently  except  a  resistance  to  commercialism 
exerted  by  him  in  unity  with  all  other  Ultimate  Consumers,  and 
simultaneously  against  all  forms  of  commercialism. 

IV.  Is   an   Interest-bearing   Loan   Inevitable?     The   entire 
existing  factory-system,  involvi  -g  as  it  does  the  daily  direction 
of  labor  into  tasks  not  immediately  productive,  and  the  entrust- 
ing of  costly  appliances  to  those  who  do  not  own  them,  yet 
without   any   suggestion   of  any   burden   of   interest-payments 
attached  thereto,  stands  as  a  complete  refutation  of  the  idea. 

V.  Are  Interest-payments  Limited  to  the  Period  of  Temporary 
Unproductivity  of  the  New  Appliances?    Never!     Not  only  is 
the  overwhelming  bulk  of  all  interest  now  paid  upon  capitalism 
attached   to   appliances  which  have  long  been  productive,  or 
which  have  lived  their  natural  life  of  usefulness  and  already 
fallen  into  decay  or  desuetude,  but  the  very  fact  of  their  becom- 
ing productive  acts  as  a  signal,  under  commercialism,  not  for 
the  concellation  of  the  loan  and  the  termination  of  interest- 
payments,   but  for  an   energetic   expansion   of   the   capitalism 
attached  thereto.    The  attainment  of  the  appliances  to  produc- 
tivity is  accepted  as  a  sign  that  the  traffic  based  thereon  will 
now  bear  a  heavier  charge;  and  so  that  charge  is  immediately 
imposed,  in  the  form  of  additional  issues  of  interest-bearing 
securities,  or  of  a  rise  of  market-value  of  those  already  out. 

VI.  Does  the  Loan  always  concern  Appliances  which  aid  the 
Life-support  of  the  Consumer?     No.     But  this  is  properly  the 
topic  of  a  later  chapter,  upon  commercial  competition.     The 
illustration  of  the  six  competing  grocery-stores  will  suffice  for 
the  present. 


328  MODERN   ECONOMIC   TENDENCIES 

But  before  leaving  the  topic  of  interest  and  dividends  some 
more  general  aspects  may  deserve  a  word.  First  comes  the  wide- 
spread idea  that  if  the  rewards  of  the  capitalist  and  the  promoter 
were  abolished  progress  must  be  materially  arrested. 

The  facts  overlooked  in  this  idea  are  at  least  three  in  number. 
First,  the  chief  need  for  the  commercial  promotion  of  new  enter- 
prises, under  the  present  system,  is  to  overcome  resistances  which 
are  artificially  originated  by  commercialism  itself — resistances 
due  solely  to  the  privilege  of  private  profit  attached  to  the  goods 
already  in  the  market  in  the  same  line. 

Under  commercialism  the  most  effective  resistance  to  progress 
lies  in  the  difficulty  of  finding  capital.  Years  are  often  wasted  in 
a  discouraging  wandering  hither  and  yon,  until  the  inventor  may 
happen  upon  the  one  individual  who  chances  to  combine  the  three 
requisites,  namely,  free  capital,  free  time  for  undertaking  a  new 
enterprise,  and  a  personal  disposition  to  be  interested.  Many 
may  be  found  who  possess  one,  or  even  two,  of  these ;  but  it  takes 
a  long  search  to  find  all  three  together. 

But  under  a  national  factory-system,  with  all  the  capital  in 
the  country  available  under  a  single  commissioner,  and  he  sworn 
to  develop  new  ideas,  as  his  sole  duty,  this  difficulty  would  melt 
as  ice  in  the  sun.  And  with  it  would  go  several  other  present 
obstacles  to  progress  which  are  inherent  in  commercialism. 

The  doctrine,  for  instance,  that  because  a  new  device  has  merit 
it  must  surely  be  valuable  and  acceptable  to  one  or  another  of  the 
large  corporations  engaged  in  that  line  is  utterly  false.  It  is 
just  as  false  a  notion  as  that  a  dealer  is  best  off  when  he  handles 
the  maximum  volume  of  trade.  All  such  corporations  have 
enormous  investments  in  patterns,  jigs,  dies,  catalogues,  etc.,  for 
the  output  already  standard  with  them.  For  all  this  to  be  upset 
and  junked  by  the  appearance  of  some  better  device,  whether  in 
their  own  or  a  competitor's  hands,  is  a  commercial  catastrophe. 

Such  corporations  commonly  spend  large  sums  to  discourage 
the  introduction  of  novelties.  They  never  favor  them  unless  the 
profit  promised  is  overwhelmingly  great. 

Further,  new  enterprises,  like  inventions,  always  originate 
(unless  they  are  purely  commercial  in  their  nature)  in  uncom- 
mercial minds.  These  minds  do  not  respond  to  commercial 
rewards.  They  accept  the  promoter's  task  and  reward  only 
because  society  offers  them  no  other  or  better. 

These  originators  would  initiate  just  as  actively  upon  wages 


OTHER  FEATURES  OF  INTEREST  329 

as  upon  a  gambler's  chance  at  some  profits.  Indeed,  being  better 
and  more  regularly  fed,  they  would  originate  more  actively.  The 
man-in-the-street  who  talks  glibly  about  inducing  invention  does 
not  know  that  the  bulk  of  all  modern  invention  is  performed  by 
salaried  employees  of  the  larger  corporations,  who  invent  much 
as  a  book-keeper  posts  his  books. 

Yet,  if  anyone  still  doubts,  there  is  one  fact  prominent  in 
American,  if  not  in  world,  history  which  refutes  his  doubts. 
This  is  the  wonderful  progress  which  has  been  made  by  two  arts 
in  particular,  not  to  mention  others,  namely:  (1)  Medicine 
(including  surgery  and  hygiene),  and  (2)  Military  technique. 
Yet  in  neither  of  these  arts  is  any  pecuniary  reward  offered  in  the 
form  of  profits  or  dividends,  or  even  royalties.  Both  military 
engineers  and  physicians  would  be  disgraced  by  any  attempt  to 
secure  them. 

Finally,  the  biggest  existing  bar  to  the  adoption  of  a  host  of 
new  things  which  are  already  invented,  and  which  are  of  un- 
questionable value  to  the  public,  is  the  burden  of  paying  interest 
upon  the  commercialism  attached  to  them.  Take  for  example  the 
matter  of  putting  the  wires  underground.  All  over  the  land 
aerial  wires,  with  their  supports,  constitute  a  visible  smirch  upon 
our  civilization.  Here  and  there,  it  is  true,  traffic  is  sufficiently 
congested  so  that  it  pays  to  put  them  underground,  even  in  the 
face  of  having  to  meet  a  current  interest-charge  of  ten  per  cent 
upon  the  cost  of  burying;  but  almost  everywhere  they  are  still 
aloft. 

If  they  could  be  buried  without  the  interest-charge,  with  the 
Consumer  burdened  only  by  depreciation,  every  wire  would  have 
been  invisible  long  ago.  But  to-day,  under  commercialism,  the 
general  gain  to  the  community  in  improved  appearance  of  high- 
ways cannot  enter  the  question,  nor  affect  the  result,  because  that 
factor  does  not  pass  through  the  treasury  of  the  telegraph  or 
telephone  company. 

Mining-engineers  tell  us  that  our  underground  stock  of 
bituminous  coal  is  now  being  mined  under  a  plan  which  wastes 
surely  from  25  to  35  per  cent  of  the  deposit,  forever,  just 
because  of  the  investment  which  would  be  involved  in  a  more 
thorough  policy.  As  two-thirds  of  the  coal  is  removed  the  roof  is 
allowed  to  cave  in  upon  the  remainder.  At  no  future  time  can  a 
generation  of  men  under  greater  stress  for  fuel  than  we — and 
we  need  more  coal  badly  enough — ever  reclaim  this  residue.  The 


330  MODERN  ECONOMIC  TENDENCIES 

vein  has  been  dissolved  in  earth.  God's  bounty  has  been  wan- 
tonly wasted  forever.4 

Yet  these  illustrations  are  but  two  instances  out  of  a  myriad 
of  potential  advances  in  civilization  and  comfort,  or  of  growths 
in  population,  which  are  now  forced  to  lie  latent — some  now 
staring  us  in  the  face,  like  the  wires,  others  hidden  underground 
like  the  coal,  and  others  still  dormant  in  the  brain  of  the  in- 
ventor— the  enjoyment  of  which  is  denied  us  solely  by  our 
addiction  to  the  social  vice  of  commercialism.  The  engineering 
profession  stands  ready  to  improve  the  appearance  and  efficiency 
of  our  factories,  our  streets  and  our  homes  by  hundreds  of  per 
cent,  and  to  make  these  improvements  pay  fully  for  themselves; 
but  they  cannot  make  them  pay  ten,  twenty  or  fifty  per  cent  of 
their  first  cost  in  annual  interest-charges,  in  addition. 

Thus  our  technical  progress,  our  civic  pride,  our  public 
hygiene,  our  domestic  convenience  and  our  general  standards  of 
taste,  as  well  as  the  purchasing-power  of  our  dollar  and  the 
continuity  of  our  employment,  have  all  been  sagged  by  commer- 
cialism to  the  lowest  point  which  biological  existence  can  permit. 
We  have  seen  ugly  factories,  ugly  streets,  hideous  slums  for  the 
poor  and  graceless  barracks  for  the  rich  so  universally  that  we 
have  long  ago  lost,  or  never  imagined  at  all,  what  a  normally 
beautiful  modern  city  should  look  like. 

No ;  there  is  no  other  brake  upon  progress — not  even  war  itself 
— which  can  even  approach  the  repression  and  retardation  of 
progress  which  is  daily  exerted  by  commercialism ! 

The  Modern  Circulating-Medium — Interest-bearing  Securi- 
ties.— The  one  reason  why  all  this  growing  burden  of  commer- 
cialism has  not  long  ago  brought  about  that  social  catastrophe 
which,  it  would  appear  from  what  has  been  said,  must  be  ulti- 
mately inevitable,  is  that  commercialism,  through  its  interest- 

4  The  applications  of  electricity  to  domestic  comfort  which  now  stand 
available,  if  only  electric  current  might  be  bought  without  commercial 
charges,  is  beyond  imagination.  Every  engineer  knows  that  the  factory- 
system  costs  of  electricity — fuel,  wages  and  supplies — do  not  aggregate, 
in  these  days  of  thirty-thousand-kilowatt  units,  over  one  cent  per  K.W.- 
hour  for  steam-made,  or  one-half  cent  for  water-made  current.  Yet 
a  usual  price  to  the  consumer  is  seven  cents.  The  author  pays  ten! 

If  he  uses  less  than  a  certain  minimum  he  is  charged  more  than 
that.  The  only  excuse  offered  is  the  necessary  interest  upon  plant 
involved,  and  that,  if  the  price  were  dropped,  the  traffic  would  no  longer 
be  paying  all  the  dividends  it  could  bear.  This  excuse  has  been  given  to 
the  author  literally,  by  an  official  of  the  electric  company. 


OTHER  FEATURES   OP   INTEREST  331 

bearing  securities,  has  simultaneously  energized  the  vast  popu- 
lations of  modern  times  to  an  almost  incomprehensible  degree,  by 
its  creation  of  a  huge  fund  of  circulating  credit-instruments. 
Such  a  circulating-medium  constitutes  the  very  life-blood  of  an 
economic  society.  Society  collapses  when  this  medium  is 
attacked  as  promptly  as  does  a  man  when  his  heart  is  struck. 

The  apparent  paradox  here,  however,  is  not  a  real  one.  The 
benefit  to  society  derived  from  the  circulating  securities  lies 
wholly  in  the  fact  of  public  confidence  in  their  value,  and  not 
at  all  in  the  fact  that  they  bear  interest.  That  is  to  say,  as 
accepted  tokens  of  embodied  life-support  they  energize  a  com- 
munity, as  does  any  other  token-money  in  which  it  believes ;  but 
to  their  efficiency  in  this  capacity  their  interest-bearing  feature 
is  no  aid,  but  a  direct  and  growing  bar — except  as  a  widespread 
public  delusion  connects  the  two. 

Deferring  further  explanation  of  these  statements,  which  are 
inserted  here  merely  to  show  that  the  author  has  full  cognizance 
of  all  the  functions  of  interest-bearing  securities,  the  topic  of 
interest  may  be  closed  with  the  sweeping  statement  that  the 
further  investigation  proceeds  the  more  plain  will  it  become  that 
whatever  value  to  the  community  may  lie  latent  in  capitalism, 
the  community  itself  long  ago  created  it.  As  a  matter  of  actual 
historical  fact,  every  commercial  and  industrial  appliance  in  this 
land  has  long  ago  been  paid  for,  in  cash,  by  the  Ultimate  Con- 
sumers in  aggregate.  Many  'of  them  have  been  paid  for  more 
than  once. 

Before  the  reader  resents  this  idea  too  quickly  he  should  take 
careful  thought  as  to  what  each  successful  commercialist  may 
have  been  letting  slip  from  his  grasp,  in  the  form  of  his 
proper  share,  as  a  Consumer,  in  all  other  industries,  while 
he  has  been  acquiring  ownership  over  his  one.  Let  him  con- 
sider well  the  illustration  of  the  six  grocery-stores. 

And  let  him  note  well  that  no  particular  public  policy  based 
upon  this  fact  is  here  urged.  But  the  author  would  fail  in  his 
scientific  duty  most  pitiably  if,  after  promising  a  review  of 
the  modern  economic  tendencies,  he  neglected  or  feared  to  state 
the  indubitable  fact  that,  in  equity,  all  industrial  appliances 
have  already  been  bought  by  the  public  of  Ultimate  Consumers 
—not  the  public  of  voters— for  cash  paid  in  the  past,  yet  with- 
out a  shadow  of  title  having  yet  been  transferred  to  the  public. 


CHAPTER  XIII 

THE  IRREVOCABILITY  OF  INTEREST 

(NOTE. — This  chapter  should  properly  follow  Chapter  XX,  upon  Unem- 
ployment, because  many  of  the  positions  taken  in  this  present  chapter 
rest  upon  proofs  given  in  Chapter  XX.  Therefore  judgment  should 
be  reserved  until  Chapter  XX  has  been  read.) 

IT  may  not  be  clear  from  what  has  preceded  that,  however 
inequitable  interest  may  be  in  some  cases,  it  is  always  inequitable. 
That  is  to  say,  although  it  may  have  been  proven  that  the 
origin  of  interest  is  always  inequitable,  may  it  not  also  be 
true  that  its  destination — its  devotion  to  a  good  cause  (since 
so  many  charitable  institutions  are  supported  by  interest)  — 
may  be  capable  of  canceling  the  shame  of  its  birth?  Cannot 
the  recipient  of  interest  so  spend  it  that  the  thing  becomes 
good? 

It  must  be  obvious,  at  the  start,  that,  even  if  interest  be 
expended  by  the  capitalist  in  an  ideal  way,  for  pure  philan- 
thropy, the  good  could  not  conceivably  overbalance  the  wrong 
done  in  its  origin.  Even  when  spent  for  sheer  altruism,  has 
the  capitalist  any  right  to  extort  money  from  the  Consumer 
by  force  for  this  purpose,  rather  than  to  leave  the  question  of 
altruism  to  the  original  possessor  of  the  money,  to  decide  it 
for  himself? 

These  questions  may  arise  in  many  forms,  only  a  few  of 
which  can  be  debated  here.  Some  of  these  instances  turn 
upon  the  question  of  size  of  interest-income.  Are  not  small 
commercial  incomes  harmless? 

For  instance,  over  half  of  the  total  wealth  of  the  nation  (on 
which,  later  on,  our  estimates  of  the  aggregate  interest-pay- 
ments for  the  nation  must  be  based)  consists  of  what  the  census 
calls  "real  property  and  improvements."  But  this  includes, 
along  with  the  big,  valuable,  money-making  sites  and  buildings, 

332 


THE   IRREVOCABILITY   OF   INTEREST  333 

all  small  farms  and  their  houses,  and  the  modest  homes  of 
many  wage-earners.  It  may  easily  seem  preposterous  to  classify 
all  the  current  payments  of  rent  for  these — or  the  mere  avoid- 
ance of  such  payments,  where  the  tenant  owns  his  own  house 
and  land — as  "commercial  combat"  or  "dissipation  of  economic 
energy." 

Again,  many  wealthy  people  enjoying  an  independent  in- 
come from  interest  or  dividends  devote  some  or  all  of  their 
time  to  charity  of  various  sorts,  or  to  the  direction  or  support 
of  eleemosynary  institutions.  Most  universities  are  supported 
chiefly  by  interest  upon  endowments,  rent,  etc.  Hospitals, 
asylums  for  the  blind,  or  for  orphans,  or  sometimes  for  the 
insane;  art-schools,  museums,  research-laboratories;  "founda- 
tion" funds  which  have  accomplished  wonders  in  the  conquest 
of  disease,  etc. — all  these  usually  derive  their  support  from 
contributions  by  those  who  receive  unearned  incomes. 

Can  all  these  exertions  or  payments  be  classed  as  useless  or 
harmful?  Must  they  not  be  made  in  some  form  in  any  event? 
When  the  factory-system  shall  have  come  into  complete  adop- 
tion, as  is  urged  herein,  must  we  not  still  expect  to  accord  to 
all  these  respectable,  generous  people  an  income  at  least  ap- 
proximating what  they  now  enjoy,  if  great  ethical  injustice  is 
not  to  accompany  our  attempts  at  economic  justice? 

These  questions  are  most  important  ones,  and  are  not  to  be 
answered  in  a  word.  Indeed,  the  answer  can  be  completed  only 
later.  But  at  least  an  outline  of  what  that  reply  is  to  be,  is 
appropriate  here. 

Briefly,  as  we  replied  to  wage-earners  doing  useless  things, 
the  test  of  value  to  the  community  is  not  the  source  or  form  of 
pay,  but  the  thing  done.  We  shall  show  later  that  the  bulk 
of  all  these  charitable  efforts  is  but  a  by-product  of  the  main 
commercial  circus.  It  is  artificial  and  avoidable. 

Small  Capitalism-Consider  first,  from  the  viewpoint  of 
social  justice,  the  small  farmer  or  factory-hand  who  owns  his 
own  land  or  house,  interest  on  the  valuation  of  which  stands 
charged  in  our  tables  as  a  factor  in  commercialism.  Such  a 
person  does  not  actually  receive  interest-payments  at  all;  but 
he  charges  enough  for  his  produce,  if  a  farmer,  to  cover  such 
payments,  in  addition  to  what  he  would  have  received  as  pure 
wages  had  he  not  owned  the  farm.  Or,  if  a  wage-earner,  he 
really  gets,  as  net  wages,  this  same  amount  above  the  wages  of 


334  MODERN  ECONOMIC  TENDENCIES 

his  fellows;  because  out  of  their  wages  they  must  spend  for 
rent  an  equivalent  to  his  interest  on  his  home,  before  they  can 
buy  those  other  comforts  of  life  for  which  all  the  wages  of  the 
home-owner  are  available.  How  is  this  sort  of  interest  in- 
equitable ? 

As  a  mere  matter  of  comparative  income,  his  receipts,  rela- 
tively to  those  richer  than  himself,  are  not  inequitable.  For 
even  with  his  interest  added  to  his  wages  he  probably  still 
receives  less  than  the  true  value  of  what  he  produces. 

But  our  quarrel  is  not  with  the  size  of  his  income,  but  with 
the  present  manner  of  its  distribution  to  him.  For  this  en- 
sures that,  relatively  to  other  wage-earners  who  enjoy  no 
property,  this  interest  on  his  small  home  represents  sheer  in- 
equity. It  has  developed  in  him  a  sense  of  differentiation  from 
his  fellow-citizens,  a  supercilious  misunderstanding  of  the  non- 
owning  citizen's  position  in  life,  which  is  to-day  our  greatest 
ethical  bar  to  true  democracy  and  social  stability. 

The  fundamental  error  having  once  been  made,  of  paying  to 
both  the  owning  and  the  non-owning  producers  wages  less  (in 
purchasing-power)  than  the  value  of  what  they  produce,  this 
error  is  not  to  be  corrected  by  partially  making  up  to  one  of 
them  the  deficit  in  the  form  of  interest.  One  cannot  unscramble 
the  eggs. 

Economic  Ethics. — The  modern  economic  situation  is  this: 
That  there  is  constantly  flowing  from  all  Ultimate  Consumers, 
whether  owning  property  or  not,  a  great  tide  of  interest  and 
dividends  into  the  pockets  of  certain  other  Consumers,  all  of 
them  owners  of  property — some  of  them  big  enough  to  gain  by 
the  plan,  but  most  of  them  too  small  to  receive  as  much  as 
they  pay;  and  this  tide,  which  is  justified  neither  by  reason 
nor  sentiment,  constitutes  always  an  economic  and  ethical 
leakage  of  good  human  energy  into  the  sands.  It  is  as  a  mere 
incidental  feature  of  this  tide  that  small  portions  of  it,  on  their 
way  to  soak  the  sands,  eddy  temporarily  into  and  out  of  the 
pockets  of  various  producers  who  own  small  properties — tending 
to  make  of  them  cheap  snobs,  without  the  dignity  often  accom- 
panying real  wealth. 

This  frame  of  mind  is  undoubtedly  worse  in  the  horde  of 
petty  property-owners  than  in  the  fewer  big  ones.  Because  the 
little  ones  are  many,  this  undemocratic  and  unchristian  frame 
of  mind  becomes  important.  This  widespread  ethical  result  of 


THE  IRREVOCABILITY  OF  INTEREST  335 

petty  commercialism  stands  as  one  of  fate's  direst  threats 
against  this  country's  continued  prosperity  and  stability. 

For  most  of  the  problems  of  the  day  are  debated  by  the 
wage-earners  with  a  keen,  just  sense  of  the  equities  involved 
which  is  not  much  excelled  by  the  educated  classes.  Also,  many 
big  commercialists  are  sincerely  patriotic  and  philanthropic, 
even  to  the  point  of  condemning  commercialism.  But,  on  the 
other  hand,  on  every  issue  which  may  arise  this  middle  class 
of  microscopic  property-owners  and  employers  has  always  reacted 
towards  a  narrow-minded,  short-sighted,  avaricious,  timid  or 
vindictive  conservatism  which  is  the  full  equivalent,  in  state- 
craft, to  the  tragic  folly  of  loading  weights  on  the  safety-valve 
in  a  boiler-room. 

This  class  is  as  penny-wise  in  its  politics  as  in  its  business. 
We  blame  congress  for  both  its  penny-wise  and  its  "pork- 
barrel"  policies,  but  the  real  source  of  this  evil  lies  in  the  con- 
stituencies, with  the  vast  numbers  of  voters  who  receive  petty 
interest,  dividends  and  profits.  In  order  to  "protect  their 
property"  they  become  cheese-parers  in  all  things — in  ideas  as 
well  as  economics. 

It  is  such  facts  as  these  which  warrant  the  statement  that 
the  aggregate  of  petty  commercial  incomes  for  the  entire  na- 
tion, however  they  may  seem  harmless  because  they  are  small, 
constitutes  a  loss  of  health  to  the  body  politic  such  as  the  fewer 
large  commercialists  cannot  boast  of  being  responsible  for.  Just 
as  it  will  be  purposely  shown  later,  that  the  many  little  com- 
munities of  the  nation  comprise  a  total  population  exceeding 
the  aggregate  for  any  one  class  of  larger  cities,  so  it  may  be 
stated  that  the  aggregate  evil  due  to  the  petty  commercialism  of 
the  small  property-owners  actually  exceeds  that  of  the  few  big 
ones. 

Income  Versus  Outgo  of  Interest.— -There  is  another  as- 
pect of  the  delusion  involved  in  the  apparent  innocence  of  small 
capitalism  which  has  already  been  mentioned,  but  which  may  now 
be  reduced  to  further  accuracy  by  an  anticipatory  reference  to 
statistics  developed  later  herein.  This  is  the  delusion  involved 
in  overlooking  the  constant  payment  of  interest  across  shop- 
counter,  in  greater  volume  than  it  is  received  through  the  banks. 

Thus,  according  to  Fig.  3  (page  475)  and  Table  45  (page 
469),  a  household  which  spends  $1000  yearly  for  all  purposes, 
paid  out  across  the  shop-counter,  in  1910,  $293  in  the  form 


336  MODERN   ECONOMIC   TENDENCIES 

of  interest  to  other  people,  merged  in  the  prices  of  retail  com- 
modities. In  1920  it  will  probably  be  paying  $324  of  interest.1 
In  addition,  the  incidental  commercial  costs  of  collecting  all 
this  interest,  much  of  it  in  the  form  of  profits,  through  such 
a  cumbrous  set  of  agents  as  the  chaos  of  retail  merchants,  brings 
the  total  cost  of  commercialism  to  this  household  up  to  $465 
for  1910,  and  probably  $504  for  1920. 

Thus,  if  this  household  enjoys  savings  or  investments  which 
bring  in  6  per  cent,  it  will  require  from  $5000  to  $5400  of 
such  before  the  income  and  the  outgo  of  bare  interest  alone  is 
balanced  to  a  net  zero,  or  of  $7800  to  $8400  of  investments  be- 
fore the  commercial  game  as  a  whole  is  canceled  to  a  dead 
heat — neither  gain  nor  loss — for  this  family ! 

In  other  words,  a  household  whose  accumulated  wealth  is 
growing  only  at  the  rate  indicated — a  $600  increase  per  decade 
— is  only  just  standing  still  in  prosperity.  If  its  savings  in- 
crease at  any  less  rate  than  this,  it  is  actually  growing  poorer 
and  poorer  all  the  time ! 

Or  if,  in  order  to  acquire  that  security  against  old  age  which 
the  commercial  system  hopelessly  denies,  it  has  placed  its  re- 
liance upon  government-bonds,  paying  only  4  per  cent,  then 
all  these  figures  must  be  increased  by  one-half!2 

iThese  estimates  for  1920  are  not  based  upon  the  data  accumulated 
since  1910,  but  solely  upon  the  general  trend  of  events  from  1840  to 
1910.  The  indubitable  acceleration  of  this  trend  by  the  great  events 
since  1914  does  not  show  in  these  figures. 

2 This  estimate  as  to  the  depreciation  of  small  properties  with  time 
(when  measured  in  purchasing-power)  does  not  include  all  of  the 
factors  in  that  rising  cost  of  living  which  is  daily  making  every  poor 
man  poorer,  but  merely  those  comprised  in  the  statistical  tables  quoted 
later,  namely:  the  visible  migration  of  human  effort  out  of  productive 
and  into  commercial  avocations.  But  the  cost  of  living  is  rising  more 
rapidly  than  these  mere  factors  measure.  Yet  we  are  forced  to  forego 
its  exact  measurement  because  these  other  factors,  even  if  indubitable, 
yet  defy  statistical  confines. 

The  advantage  which  the  rich  man  possesses  over  the  poor  man,  as 
prices  rise,  is  not  at  all  confined  to  the  fact  that  the  rich  man  can 
better  afford  to  pay  the  higher  prices.  It  lies  in  the  fact  that,  as  prices 
rise  the  rich  man,  who  owns  plant  and  commodities,  gets  richer,  whereas 
the  poor  man,  who  owns  only  money,  gets  poorer! 

The  valuation  of  the  rich  man 's  property  rises  as  its  earning-capacity 
rises,  and  its  earning-capacity  rises  as  prices  rise.  But  the  poor  man's 
property  has  no  earning-capacity.  It  is  merely  a  small  magazine  of 
Stored  purchasing-power,  for  tiding  him  over  the  inevitable  rainy  day; 


THE   IRREVOCABILITY   OF   INTEREST  337 

This  is  the  accurate,  cold-blooded,  statistical  aspect  of  that 
familiar  tragedy  which  is  being  enacted  daily  in  our  great  land 
—that  of  the  person  or  family  which,  in  spite  of  industry,  some- 
times great  skill,  mutual  devotion,  sacrifice,  and  all  but  endless 
hope,  "cannot  get  ahead."  It  measures  somewhat  the  handicap 
hung  over  the  heads  of  every  immigrant  and  newborn  babe, 
in  contrast  with  the  opportunities  enjoyed  by  the  "self-made" 
men  of  a  generation  ago. 

It  is  not  to  the  pecuniary  gains  of  such  petty  capitalists  as 
these  that  we  object,  but  to  the  fact  that,  like  the  buyers  of 
lottery-tickets,  they  are  losing  when  they  think  that  they  are 
gaining.  Tor  there  are  few  households  where  the  annual  ex- 
penditures do  not  exceed  from  one-fifth  to  one-ninth  of  the 
investments  owned,  and  very  few  (falling  under  the  doubt  with 
which  this  chapter  opened)  whose  savings  accumulate  more 
rapidly  than  from  $60  to  $90  per  annum;  and  all  of  these  are 
losers,  for  themselves  and  for  society,  by  the  interest-dividend- 
rent  system,  taken  even  in  its  barest  pecuniary  aspect.  Only 
the  big  fellows  win  more  than  even  money  at  the  commercial 
game. 

Yet  the  strange  thing  is  that  it  is  particularly  this  class  of. 
public  opinion,  consisting  of  the  small  employer  or  property- 
owner,  which  always  opposes  most  virulently,  or  disdains  most 
superciliously,  all  suggestions  for  an  economic  system  better 
than  the  present  one.  Among  the  wealthy  there  is  perhaps  as 
large  a  proportion  of  broad-minded  radicals  as  among  the  wage- 
earners.  It  is  only  the  pettily  well-to-do  who  are  hopelessly 
narrow-minded,  as  a  class. 

Then  the  fact  that  income  and  outgo  in  the  form  of  interest 
or  profits  may  balance  to  a  net  zero,  for  some  certain  household, 
does  not  mean  that  that  household  is  not  a  large  loser  in- 
directly through  commercialism.  It  loses  in  dirty  streets, 
crowded,  disorderly  cities,  disease  due  to  malnutrition  and 
germs  fostered  at  every  point,  and  in  the  general  degradation 
of  our  community-standards,  as  well  as  in  rising  prices.  Thus 
the  fact  that  some  robber-baron's  retainer  of  a  thousand  years 

and   as  prices  rise  the   purchasing-power   of  this  little   store   dwindles 
and  dwindles. 

The  household  whose  margin  of  savings  is  increasing  only  at  the 
rate  stated  above  is  in  fact  falling  steadily  behind  the  increasing  cost 
of  living,  in  its  stored  purchasing-power. 


338  MODERN   ECONOMIC   TENDENCIES 

ago  might  be  able  to  boast  that  his  share  in  the  baron's  spoils 
figured  as  large  as  what  he  had  lost  through  the  exactions  of 
other  barons,  certainly  would  not  pass  to-day  as  a  warrant  for 
the  feudal  manner  of  charging  all  the  traffic  would  bear — nor 
as  proof  that  said  retainer  had  not  actually  lost  as  heavily  as 
any  mere  peasant  who  "got  it  coming  and  going" — when  com- 
pared with  a  society  freed  from  robber-barons. 

Wealth  and  Charity. — Consider  next  the  charitably  disposed 
rich.  Is  the  interest  or  rent  or  dividends  which  they  draw  and 
spend  in  charity,  or  in  the  administration  of  eleemosynary  in- 
stitutions, a  true  economic  loss? 

It  is.  Consider  well  the  sources  of  the  demands  for  their 
charity  or  administrative  skill.  Defer  your  judgment  until 
you  have  read  the  later  chapter  herein  on  Unemployment,  re- 
vealing it  as  a  fruit  of  commercialism.  For  it  proves  that 
nine-tenths  of  all  the  flotsam  of  life  which  drifts  into  these 
institutions  of  various  sorts — hospitals,  prisons,  asylums  and 
retreats  of  various  sorts,  and  including  with  them  all  healthy 
youth  needing  extra-parental  aid  toward  an  education — can  be 
traced  as  being  forced  into  this  position  or  condition  by  the 
,  steady,  blood-watering  pressure  of  commercialism  upon  the 
state.  They  are  there  because  of  the  modern  impossibility  of 
buying  life-support  at  its  natural  price.  In  proportion  to  each 
dollar  returned  to  the  help  of  these  needy  ones  by  the  best 
Mentioned  of  the  rich,  the  latter's  total  income  (and  the  losses 
to  society  incidental  to  the  manner  of  its  getting)  have  ex- 
tracted from  these  same  needy  ones  certainly  two,  and  perhaps 
five  or  six,  good  dollars! 

Those  pitiful  and  disgusting  human  wrecks  which  these  kind- 
hearted  rich 'attempt  so  vainly  to  comfort,  resuscitate  or  reform 
— those  empty  shells  of  life  which  drift  aimlessly  with  the  tide 
along  the  sea-floor  of  life,  rolling  from  one  eleemosynary  in- 
stitution to  another,  on  their  way  toward  final  dissolution — 
all  these  were  once  (in  possibilities  latent  within  their  an- 
cestors, if  not  in  their  own  bodies)  animated  with  a  vital  fluid 
which  has  gradually  been  sucked  from  their  veins  by  com- 
mercialism. These  animated  corpses  may  be  as  hideous  as 
dead  flies;  but  it  is  that  institutional  spider,  commercialism, 
and  not  the  flies  themselves,  which  is  chiefly  responsible  for 
their  ghastliness. 

Strange  and  unbelievable  as  it  may  seem  at  first  blush,  it  is 


THE  IRREVOCABILITY  OF  INTEREST  339 

yet  indubitable  to  anyone  who  looks  beneath  the  surface,  or 
who  will  withhold  conclusions  until  this  analysis  has  been  fin- 
ished, that  it  is  those  inside  the  eleemosynary  institutions  who, 
as  a  class,  are  supporting — or  who  in  the  past,  as  individuals, 
have  supported  with  their  life-blood  now  gone — the  wealthy 
patrons  of  the  institution,  and  not  the  patrons  who  support 
the  inmates.  It  is  in  the  past  gradual  outpouring  of  the  many 
little  funds  of  life  stored  in  their  incapable  bodies,  minds  and 
souls,  as  they  kept  up  as  long  as  possible  the  expenditure  of 
money  and  energy  while  they  slowly  lost  their  hold  on  life, 
that  they  maintained  their  contributions  to  that  vast  tide  of 
profits,  and  of  commodities  purchased  with  profits,  which  is 
being  currently  sucked  from  every  city-tenement,  country-vil- 
lage and  isolated  cabin  in  the  land,  to  be  absorbed  by  the  com- 
mercial world  of  antagonisms,  profits,  dividends  and  luxurious 
purchases.  Biologically  speaking,  commercialists  do  this  much 
as  scavenging  lobsters  collect  from  the  most  revolting  carrion,  as 
a  source,  the  nutriment  which  graces  our  tables  as  our  most 
highly  esteemed  delicacy. 

While  the  reader  will  naturally  be  reluctant  to  believe  this 
statement  without  proof,  it  is  obvious  that  the  proof  cannot 
be  completed  until  the  analysis  to  which  this  book  is  committed 
has  been  finished.  Yet  it  is  necessary,  in  order  to  round  out 
our  outline  of  the  true  nature  of  interest,  and  to  explain  why 
all  interest  is  included  as  alike  in  its  destructive  essence,  to 
insert  this  statement  at  this  point.  If  the  reader  has  followed 
our  opening  argument  at  all,  it  has  become  obvious  that  the 
bulk  of  all  interest  is  economically,  if  not  morally,  destructive. 
As  we  gradually  trace  this  basic  fact  into  its  utmost  ramifica- 
tions, throughout  society's  modern  intricacies,  it  will  become 
more  and  more  plain  that,  whatever  may  be  its  magnitude,  all 
funds  transferred  in  the  form  of  interest  work  waste  and 
destruction,  both  economic  and  moral. 

Interest  is  fundamentally  wrong.  The  effect  of  an  economic 
lapse  from  equity  can  no  more  be  converted  later  into  a  con- 
structive influence,  by  any  manner  of  economic  or  moral  atone- 
ment, than  a  misaimed  bullet  can  swerve,  after  leaving  the 
muzzle,  to  hit  the  mark. 

The  Transfusion  of  Economic  Energy. — Whatever  may  be 
the  kindliness  of  heart  which  may  direct  the  expenditure  of 
interest,  once  abstracted  from  the  Consumer,  it  is  forever  de- 


340  MODERN   ECONOMIC   TENDENCIES 

barred  from  returning  that  life-blood,  which  it  disseminates 
so  charitably,  to  the  arteries  whence  it  was  originally  tapped. 
Indeed,  it  is  debarred  from  ever  returning  to  any  destination 
whatever  more  than  a  small  fraction  of  the  original  abstrac- 
tion, so  much  is  lost  on  the  way! 

The  physical  transfusion  of  blood  may  be  practicable  and 
profitable  in  surgery;  but  even  there  it  is  but  a  poor  makeshift 
for  healthy,  normal  life.  In  economics  it  is  equally  an  ab- 
normal, undesirable  process,  not  to  be  regarded  by  any  patriot 
as  other  than  a  dangerous  makeshift — to  be  relied  upon  for  the 
bare  maintenance  of  civilization's  life  only  until  a  more  normal 
and  wholesome  metabolism  may  be  set  up. 

Every  self-respecting  and  wise  community  should  see  to  it 
that  it  needs  neither  the*  original  abstraction  of  interest  from 
the  veins  of  the  Consumer,  nor  the  charitable  return  of  a  small 
part  of  it  to  human  derelicts  later.  For  all  that  is  needed,  in 
order  to  avoid  both,  is  full  faith  in  that  factory-system  upon 
which  our  entire  material  prosperity  has  been  reared,  and  which 
every  businessman  enforces  without  stint  or  qualification,  in 
every  portion  of  his  jurisdiction. 

Charity. — The  ineffectiveness  of  charity,  as  an  ameliorator 
of  the  social  sores  due  to  commercialism,  may  be  illustrated 
by  the  following  data  published  by  the  New  York  Tribune 
Fresh  Air  Fund,  and  translated  by  us  into  the  form  displayed 
here.  The  population  referred  to  in  Table  12  is  that  of  the 
metropolitan  district  to  which  such  an  enterprise  would  naturally 
apply. 

The  table  shows  well  the  futility  of  trying  to  return  effect- 
ively through  charity  a  part  of  what  never  should  have  been 
abstracted.  It  is  an  actual  fact  that  the  money  collected  for 
this  charity  in  1918,  in  the  heart  of  our  participation  in  the 
Great  War,  amounted  to  over  twenty  times  that  collected  in  the 
peaceful,  prosperous  year  of  1878,  forty  years  before.  Yet,  so 
rapidly  had  the  need  for  the  charity  grown  upon  us  in  the 
meantime,  through  increasing  congestion  of  population,  and 
so  oppressively  had  the  cost  of  each  vacation  increased — both 
facts  being  due  to  the  growth  of  commercialism — that  the  effect- 
iveness of  the  charity  has  been  dwindling  ever  since  1892, 
when  it  reached  its  maximum  of  424  vacations  per  100,000 
people  needing  them.  By  1918  the  effectiveness  had  fallen  to 
one- third,  and  in  1916  to  one-fifth,  of  this  figure. 


THE   IRREVOCABILITY   OF   INTEREST 


341 


TABLE   12 

THE  INEFFECTIVENESS  OF  CHARITY,  1877  TO  1918 


No.  of 

No.  of 

Money 
Collected 

Cost 
of 

Children 
given  Va- 
cations 

Money 
Collected 

Cost 
of 

Children 
given  Va- 
cations 

Year 

per 

100,000 
of  Popu- 
lation 

Each 
Child's 
Vacation 

per 
100,000 
of  Popu- 
lation 

Year 

per 
100,000 
of  Popu- 
lation 

Each 
Child's 
Vacation 

per 
100,000 
of  Popu- 
lation 

1877 

$10 

$3.12 

3 

1898 

$402 

$2.51 

160 

8 

167 

2.77 

56 

9 

459 

2.66 

172 

9 

326 

2.71 

120 

1900 

424 

2.76 

155 

1880 

406 

3.35 

121 

1 

548 

2.97 

184 

1 

373 

2.56 

145 

2 

495 

2.76 

179 

2 

927 

3.80 

243 

3 

501 

2.84 

176 

3 

618 

3.50 

176 

4 

446 

2.75 

162 

4 

735 

3.00 

245 

5 

489 

3.15 

167 

5 

738 

2.98 

247 

6 

465 

3.40 

137 

6 

889 

2.89 

297 

7 

524 

3.64 

144 

7 

777 

2.94 

284 

8 

615 

3.87 

159 

8 

843 

2.34 

359 

9 

722 

4.71 

150 

9 

783 

2.41 

324 

1910 

829 

4.73 

175 

1890 

719 

2.12 

338 

11 

743 

5.11 

145 

1 

816 

2.06 

394 

12 

698 

4.37 

160 

2 

775 

1.82 

424 

13 

638 

4.53 

141 

3 

710 

1.92 

369 

14 

640 

4.65 

137 

4 

585 

3.24 

261 

15 

629 

4.56 

138 

5 

492 

2.47 

199 

16 

428 

5.84 

73 

6 

810 

2.38 

239 

17 

754 

5.95 

127 

7 

615 

2.59 

237 

18 

831 

6.85 

121 

Those  who  are  interested  in  the  evolution  of  the  cost  of 
living  will  find  it  noteworthy  that  the  cost  of  each  vacation 
reached  its  minimum  in  the  year  1892.  This  is  comparable 
with  the  date,  1895,  which  is  roughly  assigned  in  Chapter  XIX, 
on  the  Cost  of  Living,  as  that  when  prices  in  general  reached 
their  minimum.  This  was  the  year  when  the  waning  effects  of 
the  Civil  War  in  creating  high  prices  had  become  overtaken  by 
the  waxing  modern  forces  of  commercial  militarism  in  elevat- 
ing prices,  to  a  net  result  of  rising  prices  from  that  date 
forward. 

It  is  for  all  these  reasons  that  all  interest-bearing  property 
will  be  classed,  in  the  statistical  tables  to  come  later,  as  being 


342  MODERN  ECONOMIC  TENDENCIES 

inevitably,  without  regard  to  the  size,  use  or  destination  of  the 
interest,  a  source  of  loss  of  one  sort  or  another  to  the  com- 
munity— perhaps  of  mere  material  welfare,  perhaps  of  bodily 
perfection  or  moral  stability,  perhaps  of  mere  poise  and  per- 
spective in  viewing  questions  of  social  justice,  or  perhaps  finally 
of  crass  life,  liberty  and  hope  of  happiness.  The  mere  fact 
that  productive  activity,  on  the  one  hand,  and  combative  or 
passive  commercialism  on  the  other,  are  often  found  merged 
within  a  single  individual,  often  of  most  modest  exterior  and 
unimpeachable  private  morals,  must  never  be  allowed  to  con- 
fuse the  mind  as  to  the  diametrically  opposite  natures  and 
results  of  the  two  social  functions  thus  merged  and  confused, 
namely :  the  constructiveness  of  the  productive  effort  on  the  one 
hand,  and  the  dire  destructiveness  of  the  commercial  function, 
on  the  other. 


CHAPTER  XIV 

COMMERCIAL    COMPETITION    AND    ENTROPITS 

THERE  now  remains  to  be  considered  only  one  last  class  of 
weapons  and  tactics  by  means  of  which  the  purchasing-power 
of  the  Ultimate  Consumer  is  diluted  and  distorted  by  the  exist- 
ing commercial  system,  namely,  active  commercial  competition 
—with  its  pecuniary  measure,  called  entropits.  In  the  pre- 
liminary definitions  this  term  was  reserved  to  cover  incomes 
acquired  by  active  effort  in  commercial  combat  over  price, 
ownership,  market  or  opportunity,  called  commercial  com- 
petition. 

Entropits  are  contrasted  with  wages  not  by  the  form  in  which 
they  are  received,  nor  by  whether  they  are  paid  by  an  employer- 
owner,  or  not,  but  solely  by  the  aim  of  the  activities  expended 
in  earning  them.  On  the  one  hand,  effort  productive  of  life- 
support  for  the  Ultimate  Consumer  brings  true  wages.  On 
the  other,  that  exerted  in  competition  over  opportunity  for, 
or  price  of,  interchange  brings  entropits. 

Entropits  is  contrasted,  on  the  third  hand,  with  interest  or 
dividends  in  that  the  latter  are  acquired  by  passive  and  con- 
tinuous ownership,  whereas  entropits  come  from  active  and 
changing  ownership. 

Exact  demarkation  between  the  relative  quantities  of  these 
two  sorts  of  income  in  the  community  is  sometimes  obscure 
and  difficult,  because  none  of  our  sources  of  statistical  informa- 
tion have  yet  set  themselves  the  task  of  illumining  it.  The 
statisticians  seem  to  fail  to  perceive  the  basic  importance  of  the 
contrast  involved.  But  usually  the  distinction,  resting  as  it 
does  upon  the  welfare  of  the  Ultimate  Consumer,  is  easy.  It 
is  nothing  like  as  difficult,  for  instance,  as  the  distinction  be- 
tween the  alleged  destructive  or  beneficial  effects  upon  the 
consumer  of  alcoholic  drink. 

The  number  of  different  ways  in  which  commercial  com- 

343 


344  MODERN  ECONOMIC  TENDENCIES 

petition,  with  its  earning  of  entropits,  may  manifest  itself  is 
large,  but  the  principal  ones  may  be  listed  as  follows : 

(1)  Buying  and  Selling  in  the  personal  sense  of  the  term. 
Such  is  the  activity  of  all  ordinary  tradesmen  or  merchants, 
in  so  far  as  they  are  not  usefully  maintaining  necessary  stocks ; 
all  shop-clerks  and  salesmen,  in  so  far  as  they  are  not  really 
aiding  the  Ultimate  Consumer  wisely  to  select  his  goods;  all 
auctioneers,  commission-merchants,  jobbers,  middlemen,  specu- 
lators,    peddlers,     commercial     travelers,     purchasing-agents, 
brokers,  etc.     Even  bankers  belong  increasingly  to  this  class, 
in  so  far  as  they  are  active  rather  than  passive  financiers. 

Such  also  is  much  of  the  activity  of  the  housewife,  or  the 
superintendent  of  labor,  both  of  whom  are  continually  forced 
to  waste  an  enormous  aggregate  of  time  and  nervous  energy 
in  trying  to  select  a  place  or  brand  of  purchase,  or  to  hire 
assistance,  in  the  face  of  a  complete  lack  of  adequate  guidance. 
Each  is  confronted,  instead,  by  a  babel  of  contending  claims  to 
superiority,  all  urged  by  interested  and  biased,  and  therefore 
superficial,  conflicting  and  untrustworthy,  advocates. 

(2)  Advertising,  particularly  in  its  special  sense  of  a  busi- 
ness or  profession  by  itself,  into  which  it  has  recently  grown. 
In  this  sense  it  includes  all  who  print,  or  who  furnish  paper, 
ink  or  presses  for,  or  who  distribute,  advertising-matter,   as 
well  as  those  who  write  or  publish  it.     It  includes  all  posters, 
electric  signs,  sandwich-men,  the  bulk  of  all  catalogues  and 
calendars,  and  an  endless  variety  of  other  schemes  of  amazing 
ingenuity,  as  well  as  the  more  familiar  display-print  which 
now  fills  the  major  portion  of  the  space  in  all  newspapers,  re- 
views and  magazines. 

The  distribution  of  real  information  as  to  novelties  is  a  de- 
partment of  production,  rather  than  of  commercialism ;  but  this 
is  a  very  different  matter  from  advertising.  All  matter  of  real 
interest  to  the  Consumer  as  to  novelties  is  now  welcomed  into 
the  reading-space  as  news.  Such  are  the  book-reviews,  notes 
of  science  or  travel,  consular  reports  of  foreign  markets,  labor- 
atory-investigations of  foods,  etc.,  or  local  items  as  to  shipments 
of  seasonal  goods. 

Advertisements,  on  the  other  hand,  seldom  concern  novelties 
and  seldom  supply  information.  Most  advertising  concerns 
articles  already  long  on  the  market.  It  seeks  merely  to  impress 
upon  the  memory  the  name  of  a  particular  brand  or  seller. 


COMMERCIAL    COMPETITION   AND   ENTROPITS  345 

The  real  contrast  between  advertising  and  news,  in  basic 
nature,  is  obvious  from  the  strict  line  drawn  between  the  two 
by  all  publishers,  physicians,  scientists  and  professional  men 
of  all  lines  and  by  the  law.  This  is  partly  because  of  the  moral 
opprobrium  properly  attaching  itself  to  anything  done  for  mere 
pecuniary  gain,  as  contrasted  with  the  motives  lying  back  of  all 
professional  or  craftsman's  effort,  and  partly  to  the  contrast 
in  responsibility  of  statement  coming  from  one  interested  only 
in  the  advancement  of  the  race,  as  against  one  actuated  solely 
by  a  share  in  expected  pecuniary  profits.  So  widely  is  it  recog- 
nized to-day  that  all  advertising  statements  must  inevitably 
be  largely  misleading  that  the  patience  of  the  public  in  longer 
countenancing  the  costly  system  is  quite  incomprehensible. 

(3)  Administration  of  Property  in  the  commercial  sense  of 
the  function;  that  is,  as  contrasted  with  its  superintendence 
in  the  productive  sense.     Almost  all  officials  of  corporations 
belong  to  this  class,  receiving  their  income  usually  in  the  form 
of  salaries,  dividends,  divided  cash-surplus,  or  securities  dis- 
tributed by  "melon-cutting";  also  many  lawyers  and  receivers, 
whose  income  takes  the  form  of  fees.    Under  this  heading  also 
might  come  those  promoters,   speculators,   real-estate  dealers, 
etc.,  who  hover  about  the  line  between  this  class  and  the  first 
named  one. 

(4)  Banking  and  Finance,  in  every  sense  except  the  routine 
duties  of  savings-banks — a  function  which  enters  in  slight  de- 
gree into  all  banking — but  including  the  investment-activities 
of  even  the  savings-banks.    While  it  might  seem  that  banking 
came  properly  under  classification  with  capitalism,  earning  in- 
terest rather  than  entropits,  yet  modern  banking  includes  also 
activities  of  the  most  combative  sort,  quite  in  addition  to  the 
passive  function  of  earning  interest.     Indeed,  it  is  just  when 
the  capitalist  world's  funds  are  invested  and  drawing  interest 
that  the  banks  have  nothing  to  do  with  them.    It  is  only  when 
they  emerge  from  investment  and  temporarily  cease  to  draw 
interest,  while  actively  seeking  re-investment,  that  the  services 
of  the  bank  are  required. 

(5)  All  Civil  Litigation,  with  its  costly  incidentals:  judges, 
clerks,  stenographers,  experts,  printers,  etc.,  in  addition  to  the 
lawyers,  and  including  lobbying,  readjustments,  franchises,  in- 
corporations, contracts,  patent-litigation,  etc.,  but  excluding  the 
prosecution  of  applications  for  letters-patent.     Even  as  to  this 


346  MODERN   ECONOMIC   TENDENCIES 

last  item,  many  patents  concern  no  appreciable  invention,  and 
therefore  cannot  be  considered  productive.  They  are  sought 
covering  only  minute  variations,  as  a  basis  for  advertising  a 
distinction  where  no  real  difference  or  improvement  exists. 
Hence  their  prosecution  must  be  classed  with  commercialism. 

(6)  All  Trades-unionism,  Strikes,  Boycotts  and  Labor-con- 
ventions, in  so  far  as  they  concern  rates  of  wage  rather  than 
improved  conditions  of  labor. 

(7)  All  Associations  of  Businessmen  for  the  control  of  prices, 
legislation  or  channels  of  trade,  including  the  nominally  social 
clubs  which  exist  chiefly  for  the  exercise  of  these  functions. 

(8)  All  Transportation  or  other  nominally  productive  Ser- 
vices subsidized  by  any  of  the  above,  and  thus  distorted  from 
useful  to  combative  ends. 

As  one  meets  daily  the  intricacy  and  diversity  of  industrial 
and  commercial  life  it  will  become  obvious  that  the  above  list 
is  illustrative  rather  than  exhaustive.  With  this  in  mind  each 
week's  experience  will  uncover  some  new  and  unsuspected  form 
of  commercial  antagonism  over  profits.  But  all  of  them,  in- 
cluding the  classification  just  given,  boil  down  into  effort 
directed  toward  one  or  another  of  the  following  general  direc- 
tions, namely: 

(A)  Excitation    to    Purchase,    or    Supposed    Increase    of 
Market-demand ; 

(B)  Diversion   to   Self   of   the   Profits   from   what   Market 
already  exists ; 

(C)  Exaggeration  of  Profits  by  securing  Special  Privilege. 

That  the  result  of  commercial  effort  amounts  merely  to  a 
transfer  to  oneself  of  something  which  is  not  created  by  that 
transfer,  but  which  must  be  lost  by  someone  else  to  the  degree 
that  it  is  enjoyed  by  the  one  acquiring  it,  will  be  seen  most 
easily  in  reference  to  Cases  B  and  C.  In  each  of  these  there  is 
no  evidence,  nor  scarcely  any  pretense,  of  any  creation  of  the 
thing  sought.  When  one  man  seeks  a  contract  against  several 
competitors  there  can  be  no  delusion  to  the  effect  that  his 
efforts  increase  the  number  or  value  of  the  contracts  to  be 
allotted.  All  his  hurryings  to  and  fro,  his  pulling  of  wires, 
his  search  for  favorable  influence,  his  careful  watchfulness, 
leave  the  amount  of  business  to  be  done  just  what  it  was  in  the 
beginning — one  contract,  and  no  more. 


COMMERCIAL   COMPETITION   AND   ENTROPITS  347 

Similarly,  when  legislative  favors  leaning  toward  certain 
profit-making  corporations  are  sought,  there  can  be  no  delusion 
that  anything  is  created  thereby.  What  the  corporations  gain 
the  people  lose.  No  vague  generalities  about  "creating  oppor- 
tunity" or  "keeping  money  in  circulation"  can  disguise  that 
fact.  The  Consumers  alone  create  opportunity.  The  people 
are  quite  capable  of  putting  their  money  into  circulation,  with- 
out aid. 

Does  Advertising  Increase  Trade. — But  when  one  turns  to 
the  first  of  these  three  sorts  of  commercialism,  "Excitation  to 
Purchase,  or  Supposed  Increase  of  Market-demand" — which  may 
be  treated  under  the  general  names  of  advertising  or  promo- 
tion— the  mind  is  immediately  seized  by  life-long  traditions  as 
to  competition  being  "the  life  of  trade,"  or  "advertising  pays," 
etc.  These  sacred  heirlooms  of  American  public  opinion  may 
not  be  lightly  disregarded. 

Of  course,  if  modern  interchange  is  to  continue  to  be  organ- 
ized (or  to  lack  organization)  as  now,  with  trade  permitted  to 
occur  only  after  commercial  combat  has  won  the  privilege,  then 
commercial  combat  must  inevitably  become  not  only  most  profit- 
able, as  an  occupation,  "but  an  absolute  prerequisite  to  inter- 
change. The  bull  in  this  sentence  is  not  accidental,  but  de- 
liberate ;  for  the  average  mind  quite  fails  to  see  it,  in  daily 
life.  It  cannot  perceive  that  of  course  advertising  pays,  if  once 
it  be  permitted.  Trade  cannot  exist  without  it — not  because 
it  helps  trade,  but  because  trade  cannot  escape  its  "tagging 
along." 

But  does  the  Consumer  buy  an  atom  more  of  stuff,  or  get  it 
any  cheaper  or  better,  for  all  this  modern  marvel  of  ingenious, 
energetic  and  expensive  advertising?  Indeed,  does  he  not 
actually  buy  far  less  than  he  otherwise  would,  if  all  this  active 
"promotion"  of  business  were  omitted,  and  production,  inter- 
change and  consumption  were  left  to  promote  themselves  by 
their  own  natural  forces?  Is  advertising  any  more  wholesome, 
as  a  steady  diet,  than  any  other  artificial  stimulant? 

There  can  be  no  hesitancy  in  answering  all  these  questions  to 
the  effect  that  every  form  of  commercialism  restricts,  in  some 
way  or  another,  the  natural  volume  of  production,  trade  and 
consumption.  While  Chapter  XT,  on  Economic  Equilibrium, 
or  "Charging  All  the  Traffic  will  Bear,"  fully  answered  these 


348  MODERN   ECONOMIC   TENDENCIES 

questions  in  a  technical  sense,  yet  a  more  popular  resume  of 
the  situation  may  not  be  amiss. 

The  basic  fact  from  which  all  argument  must  start  is  that 
the  Ultimate  Consumer  has  only  a  given  amount  of  money  to 
be  spent.  It  is  obvious  that  the  advertising  of  shoes,  for  in- 
stance, if  that  be  his  want,  cannot  possibly  put  an  additional 
penny  into  his  pocket  for  the  purchase  of  shoes;  and  that  is 
the  only  act  which  can  increase  his  aggregate  purchases. 

The  person  who  needs  shoes  needs  no  artificial  stimulus  to 
enter  a  shoe-store.  He  will  go  quickly  enough,  if  only  he  finds 
the  shoes  accessible  in  price  after  he  gets  there. 

There  is  no  use  in  making  people  desire  shoes  more,  by 
attractive  display,  advertising,  etc.,  if  that  same  display,  by  its 
cost,  makes  them  harder  to  get.  It  is  not  desire  which  moves 
the  world  of  production,  but  market-demand,  measured  in  money 
actually  spent;  and  market-demand,  when  measured  in  com- 
modities, depends  upon  the  purchasing-power  of  what  money 
the  Consumer  may  happen  to  have. 

Then  what  does  advertising  accomplish?  If  it  is  so  useless, 
why  does  it  persist? 

The  utmost  that  advertising  may  be  expected  to  accomplish, 
even  by  its  most  enthusiastic  advocates — and  even  that  is  not 
fully  realized  in  practice — is  merely  that  what  money  the  Con- 
sumer has  to  spend  will  be  spent  in  the  shop  of  the  advertiser, 
rather  than  in  a  competitor's.  That  is  all.  Not  even  the  most 
ardent  protagonist  of  advertising  can  ever  aver  that  advertising 
increases  the  amount  of  money  in  the  Consumer's  pocket.  Yet 
if,  on  the  other  hand,  it  can  be  shown  to  increase  the  price 
asked  by  one  penny,  then  it  must  have  decreased  the  aggregate 
volume  of  purchases. 

If  there  were  only  one  shop  there  would  be  no  advertising. 
People  would  then  be  more  fully  informed  as  to  what  was  in 
that  one  shop  than  they  now  are  as  to  what  is  in  the  hundreds 
of  competing  shops.  But  that  is  because  they  would  not  rely 
upon  advertising  for  the  spread  of  that  information.  They 
would  rely  upon  the  news-columns  of  the  public  press,  which 
are  always  wide  open  to  any  matter  which  contains  news-interest 
to  the  public.  It  is  because  advertisements  do  not  usually  em- 
body such  interest  that  they  are  religiously  excluded  from  the 
news-columns. 

Advertising,  like  interest,   is   demanded  by,  is  created  for, 


COMMERCIAL   COMPETITION   AND   ENTROPITS  349 

and  becomes  profitable  from  no  other  cause  than  a  discontinuity 
of  ownership,  or  ownership-in-industry,  where  such  discon- 
tinuity is  unnecessary  and  undesirable.  As  competing  busi- 
nesses which  previously  were  active  advertisers  against  each 
other  become  consolidated,  they  cease  this  form  of  combat. 

Suppose  that  a  lady  entering  a  modern  department-store  and 
inquiring  for  stockings  should  be  met  by  a  floor-walker  who 
said,  most  politely: 

"Madam,  there  is  an  excellent  stocking-counter  on  your 
right  hand,  and  the  young  man  in  charge  informs  me  that 
it  is  the  best  in  the  store.  On  your  left  you  will  find  another 
excellent  stocking-counter,  directed  by  a  young  woman  who 
announces  most  cleverly,  each  morning,  that  it  displays  the 
best  bargains  in  stockings  in  the  entire  building.  On  the 
several  other  floors  of  this  emporium  you  will  find  some  eigh- 
teen other  stocking-counters,  each  of  which  assures  me  daily 
that  its  stock  and  prices  cannot  be  excelled. 

"Pray  examine  each  of  these  counters  at  your  leisure  and 
feel  perfectly  free  in  making  your  choice.  Then  be  thankful, 
as  you  do  so,  for  the  progressive  and  enlightened  civilization 
which  preserves  to  you  so  carefully  the  boon  of  full  liberty 
in  these  matters." 

Can  you  imagine  the  lady  as  other  than  replying,  most  in- 
dignantly : 

"Sir,  I  came  here  in  order  to  conserve  my  time,  strength 
and  money  by  availing  myself  of  your  well-organized  store 
and  your  experienced  guidance.  I  now  see  that  you  have 
none  to  offer.  I  shall  go  to  another  store,  where  they  maintain 
only  one  stocking-counter.  For  that  one  is  sure  to  be  equipped 
with  everything  to  be  found  under  the  roof  in  the  form  of  a 
stocking,  and  with  no  doubt  as  to  price. 

"This  one  counter  wastes  none  of  its  energy  in  trying  to 
prove  that  it  is  better  than  others,  for  no  others  exist.  In- 
stead, it  conserves  all  its  energies  for  supplying  the  Consumer. 
There  I  can  shop  with  a  minimum  of  trouble  and  a  maximum 
of  efficiency,  in  selection  from  a  full  stock  and  free  from 
anxiety  as  to  price." 

But  the  lesson  taught  by  every  department  within  a  modern 
store  cannot  be  learned,  it  seems,  by  the  store  as  a  whole.  Nor 


350  MODERN  ECONOMIC  TENDENCIES 

can  it  be  learned  by  the  patrons.  They  cling  tenaciously  to 
their  medieval  privilege  of  having  what  they  need  scattered 
throughout  a  dozen  stores. 

The  fact  that  a  non-advertising  shoe-dealer  fails  to  sell  shoes 
does  not  mean  that  shoes  are  not  bought.  His  lack  of  ad- 
vertising does  not  diminish,  any  more  than  the  most  active 
advertising  increases,  the  aggregate  volume  of  trade.  If  A  ad- 
vertises, it  merely  diverts  trade  from  B's  shop  to  A's.  But  if 
now  B  replies  to  A's  advertisements  with  an  equal  cost  and 
skill  of  advertising,  the  two  are  obviously  just  where  they  were 
at  the  start,  as  to  relative  proportion  of  trade.  Plainly,  it  is 
only  a  relatively  superior  rate  of  increase  of  advertising  which 
can  win  permanently,  even  for  the  dealer — the  Consumer's  in- 
terests being  overlooked  for  the  moment. 

This  explains  why  it  is  that  the  volume,  energy,  ingenuity 
and  cost  of  advertising  are  all  steadily  upon  the  increase,  and 
with  acceleration  in  recent  years.  It  cannot  be  otherwise.  The 
dealer  who  stands  still  in  advertising  loses  just  as  surely,  if  not 
so  quickly,  as  he  who  does  not  advertise  at  all. 

Yet  our  rate  of  production,  per  capita,  has  not  been  in- 
creased thereby,  but  decreased.  The  great  modern  problem  is 
our  increasing  deficit  in  production  (relatively  to  our  latent 
normal  productivity),  while  we  cannot  find  sufficient  supplies 
of  paper  upon  which  to  print  our  rapidly  and  acceleratingly 
exaggerated  advertising. 

Advertising,  like  every  other  aspect  of  commercialism,  has 
no  more  faculty  for  standing  still  than  has  a  bicycle.  Like 
slavery,  or  absolutism,  or  militarism,  or  any  other  oligarchy 
of  specially  profitable  but  wrong  privilege,  it  must  grow,  grow, 
grow — so  long  as  it  exists  at  all — deaf  to  all  protests  from 
ethical  or  moral  scruples,  until  it  finally  bursts,  from  its  own 
inherent  inflation  of  falsehood. 

Trade  Depressed  by  All  Forms  of  Commercialism.— This 
whole  situation  was  reduced  to  its  lowest  terms  in  the  mathe- 
matical analysis  of  "charging  all  the  traffic  will  bear."  So 
far  as  effect  upon  the  purchasing-power  of  the  Consumer  is 
concerned,  and  hence  upon  the  general  volume  of  production 
and  trade,  it  makes  not  the  slightest  difference  whether  the 
charge  which  sags  traffic  be  incurred  in  the  form  of  rent,  interest, 
entropits  or  contributive  costs  of  competition,  including  ad- 
vertising; or  whether  collected  through  the  medium  of  an  issue 


COMMERCIAL  COMPETITION  AND   ENTROPITS  351 

of  new  securities,  a  rise  in  market-price  of  old  ones,  the  forma- 
tion of  a  bank,  an  installation  of  additional  retail-shops,  a  job 
secured  as  a  drummer,  a  solicitation  of  advertisements,  or  a 
contract  for  printing  gaudy  calendars.  Each  and  every  one 
of  these  acts  has  the  sole  effect,  so  far  as  the  advancement  of 
trade  is  concerned,  of  reducing  it — so  far  as  the  local  effort  in 
question  bears  any  weight  whatever — by  from  seventy  to  eighty 
per  cent  below  what  it  naturally  would  have  been. 

In  this  simple  fact  lies  the  gist  of  why  it  is  to-day  that,  with 
incitements  to  purchase  such  as  have  never  before  been  seen, 
as  to  ingenuity,  brilliance,  cost  and  ubiquity,  there  prevails 
at  present  an  irregularly  decreasing  volume  of  purchases  per 
capita,  in  proportion  to  productive  possibilities ;  yet  at  the  same 
time  a  rising  problem  of  unemployment.  The  two  phenomena 
are  both  the  result  of  the  same  cauSfe — an  increasing  intensity 
of  commercialism  (in  which  advertising  constitutes  one  of  the 
most  costly  features)  with  its  resultant  increasing  loss  of  pur- 
chasing-power and  hiring  power  in  the  Consumer's  dollar. 

Advertising1  as  an  Educator. — It  has  already  been  made 
plain,  from  the  most  basic  considerations,  that  advertising  does 
not,  and  cannot,  increase  the  aggregate  volume  of  trade,  but 
rather  that  it  decreases  it  tremendously.  But  is  it  even  true 
that  advertising  incidentally  performs,  even  if  at  undue  cost, 
the  one  service  for  which  it  is  universally  credited,  namely,  the 
education  of  the  people  as  to  current  novelties  ?  It  will  promptly 
appear  that  it  does  not. 

In  the  first  place,  the  bulk  of  all  advertising  relates  to  goods 
which  are  no  novelties  at  all,  but  the  worst  "has-beens"  on  the 
market.  That  is  the  reason,  indeed,  why,  under  commercialism, 
they  must  be  advertised.  Without  it  they  would  have  long 
been  forgotten  in  preference  for  later  brands. 

Or,  if  they  be  really  as  good  or  better  than  the  later  comers, 
their  quality,  if  commercial  competition  be  the  fair  arena  of 
just  dispute  which  its  advocates  urge,  should  have  stood  for 
itself.  How  about  the  silverware  established  in  1847,  the 
whisky  made  since  1820  and  "still  going  strong,"  or  the  pictures 
of  colonial  dames  buying  a  certain  brand  of  soap  in  the  tiny, 
dirty  shops  of  that  day?  Why  do  we  need  such  frequent,  in- 
sistent, impertinent  and  costly — nay,  frantic — reminders  of 
these,  if  they  have  so  long  been  recognized  as  good? 

The  plain  answer  is  that  the  commercial  system  offers  the 


352  MODERN   ECONOMIC   TENDENCIES 

largest  inducements  to  the  newcomers  to  come  as  near  to  lying, 
or  at  least  misleading,  the  public  about  the  old  as  the  law  will 
allow.  The  same  inducement  is  offered  to  the  old  to  reciprocate. 
But,  in  the  name  of  common  sense  and  the  iactory  system,  why 
not  force  each  newcomer  to  undergo  examination  by  impartial 
experts  hired  by  the  Consumer,  and  each  predecessor  to  abide 
by  the  result,  and  then  let  it  go  at  that? 

Why  must  we  have  the  valuable  space  which  confronts  the 
eyes  of  millions,  during  the  tedium  of  a  subway  or  elevated 
ride,  devoted  to  displaying  pictures  of  people  in  their  under- 
wear, or  to  announcing  disgusting  remedies  for  constipation? 
In  all  of  the  repudiations  of  public  ownership  by  those  re- 
ceiving comfortable  incomes  from  private  ownership,  in  all  the 
defenses  of  advertising  as  a  valuable  means  for  educating  the 
public,  no  mention  is  ever  made  of  the  inconceivable  value  of 
this  space  in  the  cars — now  lost  to  us  by  commercialism — for 
apprising  the  public  each  morning  of  the  latest  world-news,  or 
the  last  scientific  discovery,  or  the  records  of  the  previous  day's 
sports,  or  the  arrival  of  early  fruit  from  the  south,  or  the 
latest  design  of  gown  or  bonnet,  or  last  evening's  hit  at  the 
theaters;  or  even  for  entertaining  them  with  "comic  sup."  non- 
sense, if  nothing  better. 

For  the  advantages  of  private  ownership,  like  those  of  slavery, 
militarism  or  any  other  autocracy  of  special  privilege,  are 
single,  concentrated,  organized  and  cogent,  namely,  pecuniary 
profits.  But  those  of  public  ownership  are  as  broad  and  scat- 
tered, as  unorganized  and  impotent  of  expression,  as  are  the 
millions  to  whom  its  benefits  accrue. 

Or,  as  to  the  truthfulness  of  advertisements,  why  is  it  that 
when  they  are  afraid  to  lie  outright  they  always  mislead  or 
deceive  most  skillfully,  by  half-truths  or  by  omissions?  Why 
is  it  that,  when  that  portion  of  the  public  which  has  no  children, 
and  no  interest  in  children's  diseases,  is  forced  to  buy  pages 
of  newspaper  each  morning,  or  to  stare  at  posters  by  the  hour, 
urging  one  to  buy  soothing-syrup  of  "the  kind  you  have  always 
bought/'  the  advertisers  cannot  even  be  frank  and  truthful 
about  it,  after  all  ?  For  the  brand  now  advertised  as  such  proves 
to  be  not  that  which  was  familiar  in  every  nursery  a  generation 
ago,  but  another  which  bears  a  name  so  similar  thereto  that 
the  careless  ear  will  accept  it  as  the  same. 

Both  the  cost  and  the  "value"  of  such  an  advertising-cam- 


COMMERCIAL   COMPETITION   AND   ENTROPITS  353 

paign  as  that  is  measurable  in  hundreds  of  thousands  of  dollars 
—all  paid  by  the  Ultimate  Consumer.  Yet  its  sole  aim  is  to 
mislead  the  public — and  that  on  a  point  of  no  importance  to  the 
public,  after  all. 

Even  of  goods  appearing  recently,  how  can  it  be  that  a 
certain  brand  of  chewing-gum  which  has  been  brazenly  thrust 
before  our  attention  during  the  last  few  years,  until  we  have 
been  forced  to  give  it  an  amount  of  attention  sufficient  to  have 
educated  millions  as  to  the  precession  of  the  equinoxes,  still 
needs  announcement?  And  why  is  it  that  this  most  costly 
announcement  of  the  important  arrival  of  a  new  chewing-gum 
years  ago,  has  quite  neglected,  to  date,  after  a  myriad  of  re- 
minders of  the  charm  of  a  pure  leaf-flavor  in  gum,  to  state 
positively  that  there  is  any  leaf  in  the  gum  at  all,  or  that  it 
is  exclusively  flavored  with  pure  leaf?  That  is  what  the  public 
is  expected  to  infer,  of  course;  but  committal  statements  are 
carefully  avoided. 

These  are  all  facts  so  painfully  near  the  surface,  the  instant 
one  pleads  "education  as  to  novelties"  in  defense  of  advertising, 
that  it  is  hard  to  preserve  faith  in  human  sincerity  and  sanity 
in  the  face  of  such  a  plea.  Announcements  made  for  no  other 
motive  than  the  private  profit  of  one  who  did  not  make  the 
thing  advertised,  who  has  no  workman's  pride  in  its  excellence, 
who  usually  knows  nothing  about  the  details  of  its  manufacture, 
and  who  deserves  not  the  slightest  credit  or  reward  therefor — 
concerning  commodities  which  are  manufactured  in  huge  quanti- 
ties by  machine-processes,  with  the  labor-element  reduced  as 
nearly  as  possible  to  that  of  a  slave  under  a  hired  overseer,  and 
then  sold  under  the  name  of  a  man  whose  individuality  has 
long  ceased  to  be  connected  in  any  way  with  the  product — do 
not  contain  information  of  value  to  the  human  race.  Progress 
in  human  knowledge  must  look  to  quite  other  aids  than  that 
for  its  dissemination. 

Because  of  our  vow  to  refrain  from  muck-raking  we  omit  all 
debate  of  such  advertising  as  that  of  patent  medicines,  where 
machine-made  remedies  bear  the  name  and  likeness  of  persons 
now  long  dead,  backed  by  references  bought  from  dummy  bene- 
ficiaries. All  such  advertising  as  that  crops  out,  not  as  a  thing 
originating  with  mendacious  human  nature,  but  as  the  quite 
rational  and  inevitable  result  of  permitting  income  to  be  re- 
ceived in  the  form  of  profits  induced  by  advertising. 


354  MODERN   ECONOMIC  TENDENCIES 

Advertising  as  a  False  Stimulant  of  Journalism.— The  re- 
cent mushroom-like  growth  of  our  periodical  publications, 
under  the  artificial  stimulation  of  income  from  advertising,  and 
its  detrimental  effects  upon  our  journalism  and  upon  that  phase 
of  public  education  which  must  rely  upon  journalism,  will  be 
treated  later,  in  connection  with  the  topic  of  the  freedom  of 
the  press.  For  the  present,  debate  must  be  confined  to  ad- 
vertising itself,  as  a  matter  of  economic  rather  than  ethical 
importance.  For  its  recent  marked  acceleration  constitutes  one 
of  the  many  evidences  that  modern  civilization  is  sliding  side- 
ways off  the  true  path,  temporarily,  instead  of  advancing  directty 
forward. 

When  our  real  and  growing  social  instability  has  come  to  be 
revealed  by  accidental  stress,  as  it  surely  will  be,  one  of  the 
gravest  tokens  of  the  degree  to  which  we  have  been  hiding  our 
head,  like  a  timid  ostrich,  in  the  commercial  sand,  is  the  way 
in  which  our  money  available  for  reading  has  been  systematically 
wasted  upon  advertisements  of  things  which  are  not  novelties, 
and  which  we  do  not  want.  Our  heaviest  and  most  dangerous 
weight  upon  the  social  safety-valve  of  free  speech,  we  shall 
find,  is  our  journalism  privately  owned  for  dividends,  and  en- 
trusted to  so  unnatural  a  foster-parent  as  income  from  ad- 
vertising for  its  support.  Its  shameful  prostitution  to  a 
promiscuous  intermingling  of  advertising  with  reading  matter 
follows  from  that  as  a  natural  result. 

The  Fetich  of  the  Twentieth  Century.— When  future  cen- 
turies shall  have  written  their  histories  of  the  present  one, 
the  motto  assigned  to  that  extending,  say,  from  1825  to  1925 
will  be  nothing  so  beautiful  as  Grecian  art  and  philosophy, 
nor  so  dignified  as  Eoman  law  and  discipline,  nor  so  inspiring 
as  the  religious  fervor  of  the  Crusaders,  nor  so  mystic  as  the 
glamour  of  medieval  chivalry,  nor  so  thrilling  as  Elizabethan 
adventure  over  unknown  oceans,,  nor  so  solidifying  as  devotion 
to  democratic  ideals  in  the  face  of  enthroned  tyranny,  such  as 
have  demarked  earlier  centuries.  Instead,  our  present  world- 
motto,  which  we  are  never  permitted  to  forget  amidst  higher 
things,  will  be  emblazoned  for  all  times:  "It  pays  to  ad- 
vertise !" 

For  never  during  these  earlier  centuries  has  there  been  any 
one  institution  which  has  grown  so  steadily,  we  shall  find, 
nor  which  absorbed  so  large  a  portion  of  the  people's  energy, 


COMMERCIAL  COMPETITION  AND  ENTROPITS  355 

nor  which  accelerated  at  an  equal  rate,  nor  which  even  ruled 
with  a  heavier  hand  (when  once  the  facts  are  understood),  than 
that  of  modern  commercial  militarism,  called  "business." 
Under  the  magic  spell  of  the  gleaming  grail  called  private 
pecuniary  profits,  our  entire  civilization  has  gradually  been 
placed  under  feudal  tribute  to,  and  its  destiny  enslaved  by, 
commercialism.  Under  the  free  license  which  it  boastfully 
grants  to  all  who  care  to  enter  the  fight  for  profits,  our  best 
citizens — nearly  always  unconsciously — have  become,  in  effect, 
irresponsible  privateers  at  best,  and  at  worst  murderous  buc- 
caneers. 

For  our  death-rates,  recording  tragedies  the  cause  of  which 
they  do  not  explain,  are  now  known  to  be  subject  to  economic 
conditions  far  more  than  they  are  to  current  technique  in 
biology  or  hygiene.  Tuberculosis,  syphilis,  etc.,  which  are  per- 
fectly understood  biologically,  are  now  recognized  as  being 
social,  rather  than  physiological,  problems.  The  death-rate, 
especially  for  infants,  and  the  price-index  rise  and  fall  together. 

Our  modern  cities  have  amassed  absurdly  congested  popula- 
tions. Sickening  slums  fester  beneath  the  noses  of  an  aristo- 
cratic, quasi-military  oligarchy,  quite  as  medieval  filth  be- 
smirched the  similarly  superficial  glitter  of  that  day.  Tower- 
ing skyscrapers  have  shot  up  like  fortresses  overlooking  canons, 
overawing  the  passing  traffic  into  all  the  tribute  which  it  can 
bear,  exactly  as  medieval  battlements  did  the  same  with  cross- 
bow and  men-at-arms.  Speed,  noise  and  insincere  display  have 
become  life's  highest  standards — all  at  the  call  of  the  god  of 
war-over-profit,  now  unshakably  enthroned  as  our  all  too  golden 
idol.  To  write  a  political  economy  without  some  reference  to 
all  this  in  our  tables  of  statistics  would  be  criminal. 

For  never  was  an  idolatry  based  upon  a  more  hollow  or,  in 
effect,  a  more  cruel  superstition.  The  office  of  science  is  to 
unmask  it,  as  truly  as  it  was,  five  centuries  ago,  to  face  the 
stake  in  exposing  the  corruption  of  the  religious  orders  of  that 
day,  or  in  announcing  the  correct  theory  of  the  solar  system. 
When  the  reader  once  understands  that  the  horrid  Inquisition 
of  the  sixteenth  century  was  largely  a  money-making  institu- 
tion, the  estates  of  the  condemned  heretics  being  confiscate 
to  the  church,  with  a  "rake-off"  for  the  witnesses  testifying 
against  them,  he  will  better  understand  the  parallel  between 
the  inability  of  the  wholesome  human  nature  of  that  day  to 


356  MODERN   ECONOMIC   TENDENCIES 

make  progress  against  its  cruelties,  with  the  impotence  of 
modern  democracy  in  the  clutch  of  modern  commercialism. 

But  we  might  at  least  think  straight.  Yet  the  subservience 
of  simpler  folk  in  earlier  times  before  deities  of  wood,  metal 
or  cassock,  in  super stitiously  conservative  beliefs  which  forced 
them  into  the  most  cruel  of  blundering  sacrifices,  surpasses  not 
one  whit  our  modern  national  superstition  as  to  the  sacredness 
of  commercialism.  For  our  factories,  offices,  schools,  churches, 
universities,  legislatures,  judiciaries,  editors,  commissions  and 
presidential  cabinets — all  alike  are  ready  to  throw  themselves 
prostrate,  in  their  every  official  act,  before  the  quite  unreason- 
ing belief  (unfounded  upon  fact  and  defiant  of  the  impressive 
success  of  the  factory-system)  in  the  necessity  of  stocks,  bonds, 
profits,  dividends,  ownership-in-industry  and  commercial  com- 
petition, as  our  social  cornerstones. 

Each  of  these  officials  thanks  God  for  our  sacred  liberty, 
purchased  by  the  blood  of  our  forefathers  and  conserved  to 
every  man  by  our  Constitution,  to  buy  anything  in  sight  (al- 
though having  no  desire  to  consume  it)  at  the  lowest  price 
which  he  may  be  able  to  enforce,  and  then  to  sell  it  (usually 
to  someone  equally  lacking  interest  in  the  thing  itself)  at  the 
highest  possible  price — by  which  act  he  has  visibly  accomplished 
nothing  better  than  to  make  the  higher  price  do  what  the  lower 
price  would  have  done  without  his  officiousness.  Actually,  but 
invisibly,  he  has  done  far  worse  than  that.  He  has  undermined 
our  whole  modern  structure  of  democratic  liberty.  He  has 
planted  the  mine  which  is  destined  to  blow,  temporarily,  our 
every  American  constitutional  right  and  liberty  out  of  our 
reach.  But  not  one  of  these  officials  can  be  persuaded  to  recog- 
nize that  fact. 


PART  III 
DATA 

CHAPTER  XV 

RECENT    ECONOMIC    HISTORY 

IT  is  only  when  one  has  thus  been  equipped  with  a  pene- 
trating analysis  of  the  mechanical  relationships  prevailing  be- 
tween one  part  of  society's  activities  and  another,  such  as  has 
now  been  completed  in  outline,  and  with  at  least  this  pre- 
liminary glance  at  the  resultant  relations  between  economic 
cause  and  ethical  effect,  that  one  may  for  the  first  time  become 
competent  to  read  American  economic  history  with  a  compre- 
hending mind.  Without  this  nothing  can  be  seen  in  proper 
perspective. 

According  to  this  perspective,  the  first  responsibility  resting 
upon  every  teacher  of  sociology  is  for  the  tracing  of  the  growth 
of  commercialism,  and  of  all  its  possible  effects.  In  order  to 
do  this  with  accuracy,  through  the  statistical  data  with  which 
our  libraries  are  overcharged,  and  in  particular  through  the 
reports  of  the  United  States  census,  this  present  review  of  the 
economic  progress  of  the  last  two  generations  is  here  resumed 
in  statistical  form. 

Per-Capita  Data. — As  to  program,  first  is  to  be  noted  the 
rate  of  growth  of  net  material  life-support,  and  other  quanti- 
ties, per  inhabitant.  Mere  statistical  aggregates  are  blinding 
and  misleading.  What  each  person  needs  to  know  is  the  degree 
to  which  each  average  citizen  is  affected,  in  this  direction  or 
that,  upon  the  average — discounting  increases  in  poulation  and 
the  like. 

357 


358  MODERN   ECONOMIC   TENDENCIES 

Directions  of  Progress. — Secondly,  which  way  are  we  going  ? 
Are  we  really  getting  richer,  or  poorer,  in  the  supplies  reaching 
each  person,  on  the  average;  or  is  it  merely  that  we  feel  poor? 
And  if  so,  why?  Are  prices  high  because  there  is  a  smaller 
supply  per  capita,  or  for  some  other  reason? 

Rates  of  Growth. — Finally,  what  have  been  the  comparative 
rates  of  progress  of  our  basic  economic  phenomena?  What 
have  been  the  relative  rates  of  growth  upon  us  of  the  national 
factory-system,  which  has  produced  all  our  material  wealth,  on 
the  one  hand,  and  of  that  commercial  militarism,  on  the  other, 
which  has  prevented  our  producing  more? 

For,  in  the  development  of  social  crises,  it  is  time  which  is 
the  one  all-important  factor.  Events  occur  without  our  ex- 
pectation. Reforms  which  might  have  been  remedial  a  few 
years  earlier  have  become  impotent  by  the  time  they  have  been 
accomplished. 

Yet  this  factor  of  time,  or  rate,  is  so  commonly  overlooked. 
So  many  good  people  debate  our  public  problems  as  if  they 
were  stationary,  so  that,  if  we  made  ever  so  little  progress  to- 
ward their  solution,  we  must  eventually  solve  them.  They 
reason  as  if  we  had  untold  centuries  in  which  to  nibble  at 
things.  They  forget  that  a  social  crisis  has  as  definite  a  rate 
of  gathering  as  has  a  thunderstorm.  Most  of  the  social  reme- 
dies now  advocated  are  about  as  wise,  for  effective  reform,  as 
would  be  the  commencement  of  plans  for  a  stone-house,  for 
shelter,  after  a  thundercloud  has  been  begun  to  gather.  Others 
make  the  mistake  in  the  opposite  direction — of  raising  an  um- 
brella to  ward  off  an  avalanche. 

Therefore  an  inquiry  of  the  utmost  importance  is:  How 
rapidly  is  this  economic  situation  growing  upon  us?  When  we 
know,  fairly  accurately,  both  rate  and  direction,  then,  and  not 
before,  shall  we  be  equipped  for  prescribing  remedies  with  some 
hope  of  effectiveness. 

Density  of  Population.— A  few  trite  facts  must  be  re-stated 
at  the  start.  Thus,  we  all  know  that  our  population  has  grown 
tremendously;  and  our  territory  also,  until  recently.  But  of 
late  further  territorial  expansion  has  become  impossible.  Since 
density  of  population  lies  at  the  very  base  of  many  economic 
conditions,  the  exact  facts  as  to  this  are  needed  first. 

Table  13  shows,  in  regard  to  this,  that  during  the  first  half 
of  our  national  life  the  mean  density  of  population  remained 


RECENT   ECONOMIC   HISTORY 


359 


substantially  constant,  between  five  and  ten  persons  per  square 
mile  of  political  area,  and  between  ten  and  fifteen  for  the  area 
coming  under  enumeration.  During  this  period  both  territory 
and  population  expanded  in  parallel.  But  by  1849  the  tide  of 

TABLE  13 
POPULATION  AND  ITS  DENSITY,  1790  to  1915 


Density, 

Inhabitants  per  Square  Mile  of 

Year 

Population 

Political  Area 

Enumerated  Area 

1790 

3,930,000 

4.5 

9.4 

1800 

5,310,000 

6.1 

12.2 

1810 

7,240,000 

4.3 

13.0 

1820 

9,640,000 

5.5 

14.0 

1830 

12,870,000 

7.3 

14.7 

1840 

17,070,000 

9.7 

14.4 

1850 

23,190,000 

7.9 

15.2 

1860 

31,440,000 

10.6 

16.1 

1870 

38,560,000 

13.0 

18.1 

1880 

50,160,000 

16.9 

18.4 

1890 

62,950,000 

21.2 

21.2 

1900 

76  300,000 

25.7 

25.7 

1910 

92,000,000 

30.9 

30.9 

1915 

(est.)  101,000,000 

34.0 

34.0 

western  migration  had  touched  the  Pacific  Coast,  and  there- 
after the  density  rose  rapidly,  reaching  in  1915  some  six  times 
the  figure  for  1820,  for  political  area.  The  density  per 
enumerated  area  of  course  increased  less  rapidly. 

The  Drift  from  Agriculture  to  Technical  Vocations.— We 
all  know,  also,  that  during  our  national  life  there  has  occurred 
a  marked  expansion  of  the  mechanic  arts  and  the  technical 
sciences,  at  the  expense  of  agriculture.  In  Table  14  appear 
the  exact  facts  as  to  this,  as  shown  by  the  basic  classification 
of  the  United  States  Census  Bureau. 

In  the  earlier  decades  of  this  table  occurs  a  discrepancy  due 
to  the  fact  that  previously  to  1870  only  free  males  above  the 
age  of  sixteen  were  enumerated,  whereas  on  and  since  that 
date  both  sexes  above  the  age  of  ten  have  been  included.  A 


360 


MODERN   ECONOMIC   TENDENCIES 


second  discrepancy  is  due  to  the  appearance  in  the  data  for 
1870  of  a  great  mass  of  negro  labor.  But  neither  of  these  dis- 
crepancies vitiates  appreciably  the  accuracy  of  any  conclusions 
as  to  the  growth  of  commercialism,  because  it  is  known  that 
both  of  these  additions  to  the  enumerated  population  must  have 
been  originally  almost  exclusively  agricultural  and  domestic  in 
occupation.  In  1860  a  census  of  occupations  was  taken,  but 
it  was  not  classified  by  the  census-bureau. 

TABLE   14 
THE  NATION'S  BROAD  CLASSES  OP  VOCATION,  1820  TO  1910 


1820 

1840 

1850 

1860 

1870 

1880 

1890 

1900 

1910 

Percentage  of  total  popula- 
tion   enumerated    as    to 
vocation     

25.8 

28.1 

23.2 

26.3 

32.5 

34.6 

36.2 

38.1 

41.5 

Percentage  of  enumerated 
population    devoted   to: 
Agriculture  

83.1 

2.9 
14  0 

77.5 
1.4 

4.3 
16  8 

47.6 
3.0 
18.1 



47.6 
3.0 
18.1 
9.9 

21.4 

44.3 
3.5 
19.7 
10.8 

21.7 

37.7 
4.1 
18.6 
14.6 

25.0 

35.7 
4.3 
19.2 
16.4 

24.4 

33.0 
4.8 
14.0 
19.9 

28.3 

Professional  
Domestic  and  personal  .... 
Trade  and  transportation  .  . 
Manufacturing     and     me- 
chanical      

The  Drift  from  Domestic  to  Wage-earning  Vocations.— 

The  proportion  of  population  enumerated  as  "occupied"  has  in- 
creased fairly  steadily  throughout  the  period  covered.  Since 
1850  this  increase  has  been  unbroken,  averaging  2.2  per  cent 
of  total  population  per  decade.  A  correction  for  the  negroes, 
separately  estimated  from  slave-statistics  in  connection  with 
Table  27,  brings  this  average  increase  per  decade  down  to  1.6 
per  cent. 

This  most  noteworthy  feature  of  Table  14  thus  shows,  not 
an  increase  in  national  industriousness,  as  might  be  supposed 
at  first  glance,  but  a  steady  drift  of  industry  out  of  the  home 
and  into  the  factory.  Not  only  were  the  bulk  of  those  who 
later  entered  the  ranks  of  the  "enumerated"  previously  at  work, 
in  house  or  field,  but  there  is  non-statistical  evidence  to  the 
effect  that  they  were  probably  harder  at  work,  and  at  an  earlier 


RECENT   ECONOMIC   HISTORY  361 

age,  than  when  they  became  enumerated  as  "gainfully  oc- 
cupied." 

Most  of  those  not  enumerated  in  the  earlier  decades  were 
housewives.  In  those  earlier  years  nearly  all  housewives  toiled 
incessantly,  although  not  enumerated  as  possessing  a  vocation. 
Of  recent  years  the  descendants  or  counterparts  of  these  house- 
wives have  many  of  them  become  idlers,  supported  by  busy 
commercialist  husbands,  while  many  more  have  drifted  from 
home  to  wage-earning  in  some  factory. 

These  Drifts  a  World-wide  Tendency.— That  the  United 
States  is  not  peculiar  in  this  general  drift  of  vocations,  although 
it  doubtless  leads,  can  be  seen  from  the  following  figures  for  a 
portion  of  Germany  in  Table  15,  taken  from  Werner  Som- 
bart's  "Beruf  und  Besitz" : 

TABLE  15 
OCCUPATIONS  IN  PRUSSIA,  PER  CENT  OF  "OCCUPIED" 

1843  1895 

Agriculture 61 . 1  36. 1 

Industry 23.4  38.4 

Commerce  and  Exchange  (monetary) 1.9  11.4 

Domestic  service (included  in  above)  2 . 1 

Governmental,  C'erical,  Professional,  etc. ..     5.0  11.7 

The  Decline  of  Agriculture. — The  prominent  feature  of 
change  in  the  United  States  is  the  decline  of  agriculture,  from 
five-sixths  of  our  industry  in  1820  to  one-third  in  1910,  and 
the  corresponding  rise  of  trade,  transportation,  manufacture, 
and  mechanical  and  professional  vocations,  from  one-sixth  in 
1820  to  over  half  in  1910;  and  these  same  tendencies  are  ob- 
servable in  Germany,  though  less  marked  in  degree. 

The  "Domestic  and  Personal"  class  of  occupations  alone  has 
remained  virtually  unchanged,  with  us.  Between  1900  and 
1910  this  class  apparently  dropped  some  25  per  cent  from  the 
average  maintained  during  the  preceding  half-century,  and  this 
may  measure  truly  the  tendency  away  from  domestic  service 
and  into  the  factory  which  has  been  commonly  noted,  due  to 
the  substitution  of  hotel  and  apartment  life  for  separate  homes. 
But  further  data  are  needed  to  confirm  this  view. 

When  one  proceeds  to  analyze  more  introspectively  the  de- 
tails of  this  blanket-classification  of  the  nation's  tendencies,  no 
concomitant  of  this  tidal  swing  away  from  agriculture  is  more 


362 


MODERN   ECONOMIC   TENDENCIES 


marked  than  the  growth  of  city-population  at  the  expense  of 
the  rural  districts. 

Congestion  in  Cities. — One  of  the  most  obvious  features  of 
modern  civilization,  the  world  over,  has  been  its  rapid  and 
intense  concentration  of  population  into  cities.  In  the  United 
States  this  tendency  has  resulted  in  the  following  rates  of 
growth  of  urban  population.  The  proportion  of  the  aggregate 
population  which  had  come  to  live  in  cities  of  over  ten  thou- 
sand people  each,  and  the  number  of  such  cities,  during  the 
last  seven  decades,  stated  in  per  cent,  is  given  in  Table  16. 

TABLE  16 
GROWTH  OF  CITIES  IN  NUMBER,  1850  TO  1910 


Number  of  Cities  above 

Per  Cent 
of  Nat'l 

10,000  Inhabitants. 

Average 

Year 

Popula'n 
Residing 
in 
Cities 

Number 

Per  Cent 
Increase 

Number 
per 
Million 
of  Total 

Size 
of 
Such 
Cities 

Newark, 
N.  J. 

Popula'n 

1850 

12.2 

66 

2.85 

43,000 

39,000 

1860 

15.0 

86 

30 

2.82 

54,900 

72,000 

1870 

19.7 

151 

75 

3.91 

50,300 

105.000 

1880 

21.5 

201 

33 

4.01 

53,600 

136,000 

1890 

28.0 

340 

20 

5.40 

51,900 

182,000 

1900 

34.6 

394 

16 

5.16 

67,000 

246,000 

1910 

40.1 

568 

44 

6.18 

65,000 

347,000 

The  marked  acceleration  in  rate  of  city-growth  between  1860 
and  1870  is  doubtless  due  to  the  Civil  War.  War  is  a  great 
consolidator.  The  apparent  drop  in  rate  of  growth  between 
1880  and  1900  is  partly  a  true  one;  but  it  is  also  apparent 
only,  due  to  the  fact  that  in  the  census-reports  for  1890  and 
later,  groups  of  formerly  independent  cities  were  consolidated 
arbitrarily  into  single  "metropolitan  districts,"  without  regard 
to  whether  they  were  politically  consolidated  or  not.  This  was 
because  such  groups  had  come  to  be  actual,  if  not  political, 
unitarv  communities. 


RECENT   ECONOMIC   HISTORY  363 

In  some  degree  there  has  occurred  political  consolidation  also ; 
but  the  essential  fact  is  the  physical  consolidation  by  growth 
into  contiguity,  and  by  the  annihilation  of  space  by  improved 
transit-facilities;  and  this  alone  has  been  heeded  in  Table  16. 
The  tremendous  return  of  the  real  rate  of  growth  in  1910,  how- 
ever— exceeding  any  of  the  earlier  figures  except  that  for 
1860-70,  which  may  not  be  accurate — is  unquestionable ;  because 
the  bases  for  comparison  in  1890,  1900  and  1910  are  the  same, 
while  the  data  are  more  reliable  in  detail. 

In  order  to  contrast  the  rates  of  growth  of  single  cities  with 
that  of  the  average  of  a  class,  a  single  city — Newark,  N.  J. — 
is  noted.  This  city  was  selected  as  being  neither  an  exclusive 
center  for  a  large  territory,  as  are  many  of  our  larger  cities,  nor 
a  remote  agricultural  town,  nor  one  devoted  chiefly  to  a  single 
industry. 

Distribution  of  Urban  Population. — Not  less  important  than 
the  aggregate  rate  of  growth  is  the  relative  distribution  of  urban 
population  among  cities  of  various  sizes.  To  show  this,  six 
classes  of  size  of  city  have  been  selected  and  the  distribution  of 
population  between  them  shown  in  Table  17. 

In  this  classification  a  set  of  limits  of  size  different  from  that 
employed  by  the  Census  Bureau  has  been  adopted.  This  is 
because  the  set  of  limits  chosen  by  the  census-authorities, 
namely,  10  to  25  thousand,  25  to  100  thousand,  100  to  250 
thousand,  etc.,  seemed  unsystematic.  According  to  this  census- 
classification,  one  class  would  include  cities  ranging  from  a 
lower  limit  up  to  an  upper  limit  four  times  that  size;  but  the 
next  class  includes  those  within  limits  the  upper  of  which  is  only 
2.5  times  the  lower  one.  This  is  not  an  even  method  of  sub- 
division. 

To  be  fair,  the  upper  limit  of  each  class  should  bear  to  the 
lower  limit  a  ratio  which  is  the  same  for  all  classes.  To  meet 
this  rule,  and  at  the  same  time  preserve  the  popular  prejudice 
in  favor  of  round  numbers,  there  has  been  adopted  for  demark- 
ing  the  class-limits  in  Table  17,  a  ratio  of  upper  limit  to  lower, 
in  each  class,  equal  to  the  square  root  of  ten,  or  3.162.  That  is 
to  say,  in  each  class  the  upper  limit  of  population  is  just  3.162 
times  the  lower  limit.  In  each  class  the  upper  limit  is  just  ten 
times  the  lower  limit  of  the  next  class  below. 

With  such  a  system  of  classification  as  that  the  population 
should  be  found  to  be  distributed  fairly  equally  between  the 


364 


MODERN   ECONOMIC   TENDENCIES 


several  classes;  and  this  Tables  17,  18  and  19  show  to  be  approx- 
imately the  case,  whatever  the  total  population  or  the  number  of 
classes.  For  any  system  of  expanding  limits  for  classes  of  city 
is  based  upon  a  crude  perception  of  what  we  believe  to  be  the 
fact,  namely,  that  population,  in  its  distribution,  obeys  much  the 
same  laws  of  fluid  equilibrium  that  inanimate  matter  and  energy 
do.  Such  a  law  would  distribute  the  cities  among  the  several 
classes  in  inverse  proportion  to  the  size  of  city,  so  that  each  class 
would  contain  equal  portions  of  the  total  population. 

TABLE  17 
DISTRIBUTION  OF  URBAN  POPULATION,  1850  TO  1910 


Per  Cent  of  Total  Population 

Year 

Commu- 
nities 

Class  A, 

Class  B, 

Class  C, 

Cla?s  D, 

Class  E, 

Class  F, 

smaller 

10,000 

31,620 

100,000 

316,200 

1,000,000 

3,162,000 

than 

to 

to 

to 

to 

to 

to 

; 

10,000 

31,620 

100,000 

316,200 

1,000,000 

3,162,000 

10,OCO,COO 

1850 

87.8 

3.3 

2.3 

2.6 

4.0 

1860 

85.0 

3.1 

2.8 

3.4 

1.8 

3.7 

.... 

1870 

80.3 

4.7 

3.0 

5.4 

2.8 

3.8 

1880 

78.5 

4.7 

3.2 

5.0 

4.5 

4.1 

.... 

1890 

72.0 

6.6 

5.0 

4.5 

4.2 

7.7 

.... 

1900 

65.4 

6.2 

5.2 

5.0 

5.9 

6.2 

6.0 

1910 

59.9 

7.3 

6.0 

4.4 

7.8 

7.6 

7.0 

The  conclusions  enforced  by  these  tables  will  embody  some 
surprises  to  those  whose  concepts  have  been  based  merely  upon 
the  idea  that  we  are  running  to  larger  and  larger  cities.  For 
first,  although  population  is  undoubtedly  gravitating  steadily  to 
the  cities,  as  shown  by  Table  16,  yet  Table  17  shows  that  the 
process  is  still  far  from  complete,  and  that  the  smaller  cities 
are  growing  in  number  quite  as  rapidly  as  the  larger  ones  are 
growing  in  size.  While  the  portion  of  our  aggregate  population 
which  lives  in  cities  of  over  ten  thousand  inhabitants  is  to-day 
between  three  and  four  times  what  it  was  in  1850,  yet  it  is  still 
less  than  half  the  population. 

Secondly,  Tables  18  and  19  show  plainly  the  tendency  of 
population  to  distribute  itself  evenly,  in  fluid  equilibrium, 


RECENT   ECONOMIC   HISTORY 


365 


throughout  the  several  classes  of  city.  If  it  be  true,  as  must  be 
the  case  in  any  such  fluid  equilibrium,  that  the  number  of  cities 
of  any  given  size  tends  to  be  inversely  proportional  to  that 
size,  then  the  average  size  of  city  of  any  one  class  must  approx- 

TABLE  18 

AVERAGE  SIZE  OF  CITY,  1850  TO  1910 


Year 

Class  A 

Class  B 

Class  C 

Class  D 

Class  E 

Class  F 

1850         

15,830 
15,640 
16,000 
16,030 
15,470 
16,800 
16,070 

44,060 
55,500 
49,300 
50,000 
52,750 
51,600 
53,400 

147,135 
184,200 
189000 
190000 
190,000 
174,500 
155,500 

481,000 
580,000 
531,000 
565,000 
444,300 
500,100 
513,140 

I860 

1,169,500 
1,461,000 
2,026,000 
1,614,000 
1,570,000 
1,745,500 

1870 

1880             

1890   

1900 

4,608,000 
6,475,000 

1910             

Average  size  

15,980 
17,780 
20,810 

50,940 
56,200 
65,810 

175,760 
177,800 
208,100 

516,400 
562,000 
658,100 

1,598,000 
1,778,000 
2,081,000 

5,541,000 
5,620,000 
6,581,000 

Geome  ric     mean 
between  limits.  . 
Arithmetical  mean 
between  limits.  . 

TABLE  19 

RELATIVE  PER  CENT  OP  URBAN  POPULATION  IN  EACH  CLASS, 
1850  TO  1910 


Year 


1850 
1860 
1870 
1880 
1890 
1900 
1910 


If  Popu- 
lation 
were 
Distrib- 

Actual Figures 

uted 
Equally 

Class  A 

Class  B 

Class  C 

Class  D 

Class  E 

Class  F 

25 

27 

19 

21 

33 

20 

21 

19 

23 

12 

25 



20 

24 

15 

27.5 

14 

19.5 

.... 

20 

22 

15 

23 

21 

19 

.... 

20 

23.5 

18 

16 

15 

27.5 

16.7 

18 

15 

14.5 

17 

18 

17*5 

16.7 

18.3 

14.9 

10.9 

19.4 

18.9 

17.6 

366  MODERN   ECONOMIC  TENDENCIES 

imate  the  geometric,  rather  than  the  arithmetical,  mean  between 
the  limits  of  that  class.  The  lower  portion  of  Table  18  shows 
plainly  that  this  is  roughly  the  case.  Indeed,  whereas  the  geo- 
metric is  smaller  than  the  arithmetical  mean  for  each  class,  the 
average  size  of  city  is  smaller  still. 

Table  19  is  devoted  to  displaying  this  law  in  another  way, 
namely,  by  the  approximate  evenness  of  distribution  of  the 
urban  population  between  the  several  classes,  regardless  of  the 
number  of  classes  involved,  or  of  the  magnitude  of  the  largest 
city.  The  first  column  (after  the  year)  shows  the  percentage 
to  be  expected  in  each  class  due  to  the  number  of  classes  repre- 
sented at  that  particular  time.  The  remaining  columns  show  the 
degree  to  which  this  theoretic  percentage  is  approximated  in 
reality. 

Apparently  this  same  law  should  hold  true  for  the  population 
living  in  still  smaller  communities  than  ten  thousand  inhab- 
itants. If  the  classification  were  continued  downwardly  to 
include  the  smallest  communities,  the  total  population  should  be 
found  fairly  evenly  distributed  throughout  all  sizes  of  com- 
munity. 

But  this  evenness  can  be  only  approximate,  for  only  six  such 
smaller  classes  would  then  be  required  to  bring  the  lowest  limit 
down  to  ten  persons,  barely  a  hamlet.  Since  in  1910  only  sixty 
per  cent  of  the  population  remained  to  be  accounted  for  in  this 
way,  the  average  per  cent  per  class  would  thus  be  about  ten. 
But  this  is  considerably  larger  than  the  figures  for  the  classified 
cities  of  Table  17.  Therefore  we  must  still  regard  ourselves  as 
distinctly  a  small-community  nation,  in  spite  of  our  few  big 
cities. 

But  in  1850,  by  this  same  argument,  these  six  smaller  classes 
of  community  must  have  averaged  nearly  fifteen  per  cent  each, 
in  contrast  with  only  three  or  four  per  cent  for  Classes  A  to  D ; 
whence  it  becomes  plain  that  fair  progress  has  been  accomplished, 
during  the  sixty  years,  toward  this  fluid  equalization  of  popula- 
tion throughout  the  various  sizes  of  community,  from  ten  up  to 
ten  million  inhabitants  each.  Yet  it  still  remains  true  to-day  that 
the  bulk  of  our  people  live  neither  on  farms,  for  agriculture  is 
relatively  on  the  decrease,  nor  in  the  largest  cities,  but  in  com- 
munities of  medium  size.  Here  lies  the  strength  of  the  nation. 

Average  Growth  Versus  Individual  Growth.— In  order  to 
appreciate  this  fact  one  must  get  well  in  mind  the  vast  number 


RECENT  ECONOMIC  HISTORY  367 

of  small  cities  or  towns  continually  coming  into  existence 
through  the  growth  of  villages,  and  of  villages  through  the 
growth  of  hamlets ;  for  the  mind  sees  only  the  obvious  growth  of 
this  individual  community  or  that,  forgetting  averages.  Thus, 
compare  the  last  two  columns  of  Table  16.  The  last  column 
shows  the  obvious  in  our  modern  tendencies — the  astounding 
rate  of  growth  of  a  single  representative  city,  amounting  in  the 
sixty  years  to  a  thousand  per  cent!  Yet  the  preceding  column 
shows  that  the  average  size  of  city  has  grown  during  that  period 
by  but  fifty  per  cent ! 

This  does  not  mean  that  Newark  is  growing  twenty  times 
faster  than  all  the  other  cities.  On  the  contrary,  Newark  was 
chosen  as  an  average  city.  Nearly  every  other  city  in  the  land 
is  growing  equally  fast  with  Newark.  Yet  the  average  for  all 
these  cities  rises  only  one-twentieth  as  fast  as  does  each  one  of 
them! 

It  is  because  this  puzzling  paradox  forms  a  close  parallel  with 
some  other  paradoxes  to  be  noted  later,  as  in  the  growth  of 
business-concerns,  that  this  paradox  regarding  cities  has  been 
brought  out  here.  Modern  tendencies  cannot  be  understood 
without  comprehending  the  naturalness  of  these  apparent  para- 
doxes. 

In  order  to  explain,  let  us  consider  the  average,  as  contrasted 
with  the  individual,  ages  of  a  growing  family.  Imagine  that  a 
young  man  of  twenty-four  marries  a  girl  of  twenty,  and  that 
each  three  years  thereafter  the  couple  has  a  child.  Each  mem- 
ber of  this  family  is  constantly  aging  at  the  same  rate,  year  per 
year.  At  the  birth  of  each  child  each  individual  is  three  years 
older  than  before. 

Yet  does  the  average  age  of  the  entire  family  grow  at  a  like 
rate  ?  Not  at  all.  Stating  this  average  for  successive  three-year 
periods,  beginning  at  the  date  of  marriage,  it  runs  as  follows: 
22,  16.7  14.7,  14.2,  14.3,  14.9,  15.6,  etc.  It  first  falls,  because 
of  the  advent  of  infants  of  zero  age,  and  then  rises  slowly,  but 
at  nothing  like  the  rate  of  aging  of  each  individual. 

If  this  process  be  followed  until  the  parents  cease  having 
children  and  perhaps  die,  and  if  all  the  families  of  a  community 
be  averaged  together,  then  the  average  age  of  the  entire  lot  will 
be  found  to  remain  constant,  regardless  of  the  lapse  of  time. 
Yet  each  member  of  this  community  is  ever  aging,  year  per 
year! 


368  MODERN   ECONOMIC   TENDENCIES 

These  paradoxes  must  be  kept  in  mind  when  we  look  about 
superficially  and  see  single  cities  growing  apace,  and  solitary 
"trusts"  expanding  at  a  startling  rate.  We  must  not  be  deceived. 
The  real  tendencies  of  the  land  are  not  indicated  truly  by  such 
isolated  facts.  One  must  look  beneath  the  surface. 

The  World-drift  into  Cities. — This  steady,  ebbless  tidal  flow 
of  population  into  cities  characterizes  modern  civilization  over 
the  entire  commercial  world.  It  is  no  mere  American  freak. 
The  cities  of  the  old  world  are  growing  only  less  rapidly  than 
those  of  the  new. 

This  world-migration  into  cities  shows  not  the  slightest  sign 
of  being  the  result  of  any  mere  whim,  nor  of  accident,  nor  of 
local  condition,  nor  of  form  of  government.  No  phenomenon 
of  the  magnitude  and  permanence  of  this  vast  migration  may 
reasonably  be  attributed  to  mere  notion,  nor  even  taste,  on  the 
part  of  the  myriads  of  individuals  taking  part;  for  they  could 
not  conceivably,  by  any  of  the  mathematical  laws  of  chance,  be 
imagined  as  seized  simultaneously  with  this  same  whim,  nor  of 
holding  to  it  so  tenaciously  in  the  face  of  the  obvious  objections 
to  life  in  a  congested  city.  Any  phenomenon  of  this  controlling 
importance  can  be  explained  only  by  some  force  of  a  basic  char- 
acter, released  simultaneously  the  world  over,  by  the  reactions 
of  some  institution  as  basic,  as  world-wide  and  as  dominant  as 
itself. 

Migration  Enforced  by  Commercialism. — There  is  only  one 
international  institution  which  meets  these  specifications,  and 
that  is  commercialism.  Wherever  that  is  rife,  or  is  a  dominant 
factor,  as  is  true  of  the  United  States  and  western  Europe,  there 
the  congestion  of  populations  in  cities  and  the  rise  of  the  social 
problem  is  proceeding  most  rapidly,  and  to  the  farthest  extreme. 
For  this  migration  exemplifies  upon  a  world-scale  that  same 
natural  and  inevitable  tendency  which  was  noted  as  becoming 
active  in  our  imaginary  modern  factory,  as  soon  as  it  had  become 
permeated  with  commercialism  or  ownership-in-industry, 
namely,  the  tendency  for  the  abler  hands  to  drift  away  from  the 
machines  and  benches  of  productive  labor,  and  to  gravitate  into 
the  more  comfortable  and  lucrative  vocations  of  commercial 
militarism. 

For  the  country  and  the  small  town  is  the  natural  habitat  of 
the  plow,  the  bench  and  the  machine-tool.  The  city  is  that  of 
commercial  combat.  The  cities  grow  and  congest  because, 


RECENT   ECONOMIC   HISTORY  369 

wherever  militarism,  whether  martial  or  commercial,  is  given 
ascendency,  thither  the  power  and  the  money  of  the  land  must 
gravitate — the  power  going  because  the  money  does. 

This  basic  motive  force  which  underlies  and  compels  this 
gigantic  tendency  of  modern  populations  to  congest  in  cities  is 
best  illustrated  by  a  single  typical  instance  which  was  reported 
by  Collier's  Weekly  for  Dec.  7,  1912.  It  concerned  a  farmer  who 
had  raised,  picked,  packed  and  delivered  at  the  railroad-station, 
in  baskets  furnished  by  himself,  forty-one  baskets  of  peaches. 
These  he  turned  over  to  the  express-company  to  be  marketed  in 
New  York  City. 

In  due  time  he  received  a  statement  that  his  peaches  had  been 
sold — presumably  not  even  then  to  the  Ultimate  Consumer — for 
$17.75.  Of  this  sum  $13.59  had  been  absorbed  in  "expenses," 
leaving  to  the  farmer  a  balance  of  $4.16,  or  10  cents  a  basket ! 
Nor  is  this  case  an  extreme  one.  We  know  from  general 
observation  that  it  is  merely  illustrative. 

Now,  of  the  $13.59  some  small  portion  was  legitimate  expense 
of  transportation.  What  the  railroad  charged  we  do  not  know; 
but  the  normal  charge  for  the  distance  involved  could  not  have 
been  an  appreciable  item;  and  the  natural,  or  factory-system, 
cost  of  transportation  would  of  course  be  much  less  than  the 
normal  commercial  rate.  Then  there  was  the  wagon-carriage  in 
the  city.  Altogether,  the  natural  cost  of  producing  and  deliver- 
ing the  peaches  to  the  Ultimate  Consumer,  if  the  farmer  is  to 
get  only  $4.16,  could  not  have  exceeded  $6.00.  They  doubtless, 
sold  to  the  Ultimate  Consumer  for  from  $25  to  $40.  The 
exact  figures  do  not  matter  just  now. 

So,  of  the  money  furnished  by  the  real  source  of  demand-r- 
the  Ultimate  Consumer — not  more  than  from  one-fifth  to  one- 
eighth  went  to  those  who,  chiefly  in  the  country,  did  some  nine- 
teen-twentieths  of  the  work  of  placing  the  peaches  in  the  Con- 
sumer's hands;  while,  conversely,  from  four-fifths  to  seven- 
eighths  of  the  money  went  to  those  who,  chiefly  in  the  city,  did 
all  of  the  bargaining  over  the  peaches,  and  all  of  the  tribute- 
collecting  effected  by  blocking  the  passage  of  the  fruit  towards 
its  destination — while  they  incidentally  did  some  one-twentieth 
of  the  natural  labor  of  delivering  the  peaches. 

That,  in  a  word,  is  why  the  farms  are  being  abandoned,  the 
cities  are  being  congested,  and  the  cost  of  living  steadily  rising 
beyond  control. 


370  MODERN   ECONOMIC  TENDENCIES 

Editorial  Acumen. — But  the  most  significant — even  the  most 
menacing  and  tragic— feature  of  this  incident  lies  in  the  fact 
that  the  only  moral  which  Collier's,  one  of  our  most  intelligent 
and  liberal  reviews,  could  draw  from  it  editorially  is  this — which 
is  quoted  here  because  it  expresses  an  idea  all  but  universally 
voiced  by  educated  laymen: 

"A  good  many  people  who  live  in  cities  and  cannot  earn 
enough  there  to  buy  peaches  might  well  get  up  and  go  where 
peaches  grow,  which  is  also  the  place  of  fresh  air,  abundant 
food  and  wholesome  living/' 

And  which  is  also  the  place  where,  out  of  every  twenty-five  to 
forty  dollars  spent  in  the  land,  only  four  to  six  dollars  ever 
reaches !  And  which  is  also  the  place  where  there  is  such  a 
dearth  of  pay  for  work  actually  done,  visible  in  crops  rotting  on 
the  ground,  that  farm  after  farm  has  to  be  abandoned.  And 
which  is  also  the  place  where,  while  there  may  be  an  abundance 
of  peaches  rotting  on  one  farm,  potatoes  on  the  next  and  corn 
on  the  next,  of  everything  else  there  is  complete  dearth — where 
sugar,  coffee,  clothing,  amusement,  or  even  eggs,  must  be  pur- 
chased with  money  at  exorbitant  prices;  while  money  is  the 
last  thing  to  be  had.  And  which  is  also  the  place  where  there  is 
already  such  a  surplus  of  population  that  what  they  produce  is 
already  always  far  in  excess  of  the  city's  ability  to  buy  it! 

That  is  a  fine  place  to  recommend  to  people  as  an  economic 
and  industrial  paradise !  Why  doesn't  the  editor  of  Colliers  go 
there  himself,  without  throwing  away  such  a  valuable  pointer  as 
that  to  the  public — which  of  course,  without  his  advice,  could 
never  possibly  have  devised  so  simple  a  remedy  as  that  for  all 
their  manifest  modern  ills ! 

Social  Involuntariness  Again. — It  is  absurd,  it  is  futile,  it 
is  downright  silly  and  stupid,  if  not  maliciously  misleading,  to 
preach  to  the  people  to  flock  "back  to  the  land,"  without  first 
assuring  oneself  that  the  money  requisite  for  their  support  goes 
thither  first.  Is  it  one  of  these  futile  reliances  upon  a  grade  of 
human  nature  which  does  not  exist,  of  which  we  radicals  are  so 
often  accused,  that  we  should  really  expect  such  an  editorial 
staff  as  Collier's  to  advise  first,  and  in  no  mincing  terms,  that 
the  money  must  go  to  those  who  produce,  and  not  to  those  who 
merely  bargain  or  obstruct  ? 


RECENT  ECONOMIC   HISTORY  371 

Or  does  this  imply  a  faith  and  perspicacity  which  is  too  much 
to  ask — a  faith  which  perceives  that  when  the  money  has  been 
sent  to  the  producer,  the  people  and  the  production  will  follow 
the  money  automatically?  Yet  to 'accomplish  this,  all  that  is 
needed  is  a  refusal  to  allow  anyone  but  the  Ultimate  Consumer 
to  own  the  appliances  involved  in  supplying  him  with  life-sup- 
port. 

The  editors  and  professors  of  political  economy  have  them- 
selves migrated  from  country  to  city,  just  as  sedulously  as  any 
other  class,  and  for  the  same  reason.  It  is  queer  that  they  cannot 
preach  the  truth  about  their  own  acts. 

No  theory  of  sociology  can  stand  permanently  which  does  not 
explain  clearly  the  artificial  force  lying  back  of  this  insistent 
drift  of  the  entire  race  away  from  its  natural  habitat,  amidst 
vegetation  and  fresh  air,  towards  the  unattractive  environment 
of  a  barracks-residence  in  an  apartment-house  or  slum-tenement. 
Yet  the  really  tragic  aspect  of  this  entire  problem  is  not  the 
thing  itself — for  the  remedy  for  that  is  obvious — but  the  com- 
plete failure  of  the  best  educated  in  the  land  to  agree  upon  any 
accurate  or  consistent  interpretation  of  it. 

For  social  problems  which  cannot  be  thought  out  must  be 
fought  out.  This  is  our  excuse  for  laying  so  much  stress  upon 
what  might  seem  a  most  trivial  and  harmless  editorial  delin- 
quency. 

Growth  of  the  Nation's  Life-Support.— The  question  before 
the  nation  therefore  is  this:  In  the  face  of  a  steady  trend  of 
both  population  and  ability  away  from  agriculture  and  the 
allied  productive  arts,  and  toward  the  technical  crafts  or  the 
commercial  vocations  of  the  city,  just  what  is  it  about  the  change 
which  has  aroused  worldwide  discontent  and  created  the  social 
problem?  Is  it  that  we  are  actually  less  liberally  fed,  clothed 
and  housed  than  formerly,  however  intensely  we  may  be  amused, 
dazzled,  hustled  and  thrilled?  Are  our  troubles  physical?  Or 
physiological?  Or  psychological? 

Are  we  changing  our  human  nature  and  becoming  more 
envious  and  covetous  ?  Is  our  present  frame  of  mind  the  source, 
or  the  result,  of  a  defective  organization  of  society?  Or  is  not 
all  that  is  wrong  with  us  a  merely  stationary  condition  of  that 
organization,  in  economic  matters,  in  the  face  of  a  rapid  evolu- 
tion of  technical  environment  ? 

Is  poverty  due  to  a  mistaken,  but  controllable,  cultivation  of 


372  MODERN  ECONOMIC  TENDENCIES 

the  mechanic  arts,  at  the  expense  of  agriculture?  Is  the 
apparent  growth  in  riches  a  mere  myth,  emanating  from  the 
shrinking  value  of  the  gold  dollar?  Is  the  situation  gradually 
healing  itself?  Or  is  it  steadily  growing  worse,  revealing  an 
instability  of  civilization  which  ensures  ultimate  catastrophe  ? 

These  are  all  questions  at  the  very  base  of  any  economic  phi- 
losophy, which  seem  to  puzzle  everyone;  yet  all  are  capable  of 
answer  by  statistical  investigation. 

But  to  attempt  to  reach  these  answers  through  statistics  as  to 
either  wages  or  prices  is  hopeless  from  the  start;  for  all  wages 
and  prices  include  within  themselves  the  very  questions  asked. 
Wages  are  high  or  low  not  according  to  the  figure  on  the  pay- 
envelope,  but  according  to  what  they  will  buy.  Prices  are 
reasonable  or  exorbitant  according  to  the  pocket  to  which  they 
are  addressed. 

Program  of  Analysis.  —Therefore,  the  only  practicable  path  of 
progress  lies  in  a  dual  line  of  investigation,  namely :  First,  the 
past  development  of  our  actual  supplies  of  life-support  per 
capita,  without  regard  to  price;  and  secondly,  the  proportion  of 
our  currently  available  fund  of  industrial  energy  which  has  been 
absorbed  in  producing  this  life-support,  including  its  delivery  at 
the  only  destination  where  it  possesses  any  real  value  to  the  com- 
munity, namely,  in  the  hands  of  its  Ultimate  Consumer. 

In  measuring  this  human  energy  we  need  not,  until  later, 
concern  ourselves  with  any  perplexing  questions  as  to  whether  it 
be  brains  or  brawn  which  is  enumerated.  We  need  first  a  poll 
of  human  beings,  classified  according  to  the  nature  of  their 
economic  activities.  After  that  has  been  accomplished  it  will 
next  be  in  order  to  estimate  the  relative  productive  abilities  of 
the  various  individuals. 

But  in  none  of  this  will  it  be  relevant  to  debate  whether  these 
abilities  have  been  abundantly  or  deficiently  rewarded.  It  is 
only  as  the  recipient  of  income  turns  Consumer  that  we  may 
enquire  profitably  whether  he  is  receiving,  in  commodities,  his 
just  due. 

Outlining  this  program  a  bit  more  in  detail,  it  calls  for  an 
investigation,  as  in  the  order  of  their  relatively  basic  importance, 
of  the  following  items: 

1.  THE  PRODUCTION  OF  ACTUAL,  TANGIBLE  LIFE-SUPPORT — 
Food,  Clothing,  etc. — considered  Quantitatively  per 
Capita,  regardless  of  wage  or  Price. 


RECENT   ECONOMIC   HISTORY  373 

2.  THE  PROPORTIONS  OF  HUMAN  ENERGY  which  are  currently 

expended,  going  respectively  to  the  Production  of  such 
Life- Support,  on  the  one  hand,  or  to  Commercial  Combat 
over  its  Ownership  and  Enjoyment  when  produced,  on  the 
other,  including: 

a.  The  relative  drift  of  population  from  production  to 

commercialism,  and 

b.  The  relative  caliber  of  the  various  idividuals,  pro- 
ductive or  combative  respectfully;  and  finally 

3.  THE  RISE  OF  INCIDENTAL  COSTS  connected  with  this  drift 

from  Production  toward  Commercialism,  including : 

a.  Passive  Capitalism,  as  expressed  in  Interest,  Dividends 

and  true  Rent,  and 

b.  Active   Subsidization  and  Diversion  of  what  would 

otherwise  have  been  productive  energy  into  the  pur- 
poses of  commercial  combat — called  here  entropits. 

Forecast  of  the  General  Results  of  this  Analysis.— 
The  whole  fruit  of  this  investigation,  it  may  be  stated  in 
advance,  will  be  to  show  that  not  only  are  the  people  drifting 
steadily  from  production  to  commercialism,  as  measured  by 
numbers,  but  also  that  those  who  migrate,  like  most  emigrants, 
average  a  higher  and  higher  proportion  of  the  country's  energy 
and  nerve. 

It  will  further  appear  that  the  actual  drift  from  productive  to 
combative  vocations  has  been  greater  than  the  conscious  migra- 
tion visible  in  the  direct  statistics,  because  of  the  increasing 
numbers  of  those  who,  while  still  commonly  regarded  as  pro- 
ductive because  they  receive  wages  for  some  art  or  craft,  have 
been  hired  and  prostituted  by  the  commercial  combatants  to 
produce  for  them,  not  life-support  for  the  community,  but 
munitions  of  commercial  warfare. 

Yet  the  net  showing  will  be  that,  in  spite  of  all  this  migration 
away  from  productive  vocations — so  marvelous  has  been  the 
increase  in  efficiency  in  our  labor-saving  appliances — our  average, 
actual,  net  supply  of  life-support  per  capita  is  still  upon  the 
increase. 

In  other  words,  our  troubles  are  not  due  to  national  starvation, 
as  yet.  The  relentless  rise  in  all  prices  has  no  basis  of  explana- 
tion whatever  in  a  decreasing  supply.  The  law  of  supply  and 
demand  is  either  not  operative  at  all,  or  else,  if  operative,  is 
over-shadowed  by  some  force  far  greater. 


374 


MODERN  ECONOMIC  TENDENCIES 


Our  poverty  is  not  absolute,  but  relative.  Our  discontent  is 
due  merely  to  an  unnatural  disparity  of  wealth,  and  that  dis- 
parity is  not  immediately  explicable.  Obviously  there  are  other 
forces  at  work  far  greater  than  those  of  individual  psychology. 
Except  as  the  generalities  which  preceded  this  statistical  investi- 
gation have  given  a  hint,  we  have  not  yet  identified  these  greater 
forces.  But  our  prime  object  is  to  clear  the  way,  first,  of  various 
obstructing  misconceptions  or  economic  superstitions  which  clog 
almost  every  educated  mind  to-day,  in  order  that,  when  we  reach 
the  real  explanation,  it  will  stand  out  in  proper  clarity. 

TABLE  20 
FOOD-SUPPLY  FROM  FARMS,  1840  TO  1917 


Pease 

(H        C? 
£•0  0> 

Po- 

To- 

Year 

Corn 

Wheat 

Oats 

and 

Rice 

-•->  a  QJ 

3  a^ 

Sugar 

ta- 

Hay 

Cot- 

Wool 

bac- 

Beans 

«  6 

toes 

ton 

co 

bus. 

bus. 

bus. 

bus. 

Ibs. 

Ibs. 

Ibs. 

bus. 

tons 

Ibs. 

Ibs. 

Ibs. 

1840 

22.1 

4.97 

4.75 

9.08 

6.33 

0.60 

46 

2.11 

12.8 

1850 

25.5 

4.33 

6.32 

0.40 

9.28 

18.1 

10.70 

4.49 

0.60 

42 

2.26 

8^6 

1860 

26.7 

5.50 

5.49 

0.48 

5.95 

17.9 

7.35 

4.87 

0.60 

68  .1.92 

13.8 

1870 

19.7 

7.47 

7.31 

0.15 

1.92 

14.7 

1.13 

4.28 

0.70 

31 

2.59 

6.8 

1880 

35.0 

9.15 

8.14 

0.19 

2.19 

16.0 

1.78 

4.05 

0.70 

46 

3.11 

9.4 

1890 

33.7 

7.43 

12.85 

0.15 

2.05 

16.6 

4.78 

4.15 

1.06 

47 

2.63 

7.8 

1900 

35.0 

8.64 

12.40 

0.19 

3.72 

23.4 

8.70 

4.14 

1.10 

50 

3.63 

11.4 

1910 

27.7 

7.42 

10.95 

0.20 

7.48 

21.1 

18.01 

4.87 

1.06 

46 

3.49 

11.5 

1915 

30.2 

10.01 

15.25 



7.96 



19.17 

3.55 

0.84 

55 

2.86 

10.5 

1917  » 

29.9 

6.48 

13.89 



18 

4.32 

55 

11.6 

1  From  Government  estimates  published  early  in  July. 

Evolution  of  Life-Support  in  the  United  States.— Life- 
support  consists  of  many  things,  tangible  and  intangible;  and 
some  of  the  intangible  things,  such  as  recreation  or  religion  for 
instance,  are  just  as  necessary  for  the  continuance  and  growth 
of  life  as  are  the  tangible  ones.  But  the  tangible,  material 
requisites,  such  as  food,  clothing  and  shelter,  may  be  considered 
first.  Amonjr  these,  secondary  only  to  a  proper  supply  of  pure 
water,  food  will  doubtless  be  considered  as  of  first  importance. 

The  actual  current  production  of  food  (with  some  similar 
staples)  upon  our  farms,  stated  as  a  rate  per  annum  per  capita, 
is  given  in  Tables  20  and  21.  The  caution  given  in  Chapter  I, 


RECENT   ECONOMIC   HISTORY 


375 


that  it  is  only  quantities  reduced  to  a  per-capita  basis  which  can 
guide  without  misleading,  is  repeated  here.  What  is  needed  to 
be  known  is :  What  may  each  person,  on  the  average,  expect  as 
his  own  individual  economic  possibility,  when  drawn  from  that 
pool  of  a  hundred  million  different  interests  which  we  call  a 
nation. 

TABLE  21 
STOCK  ON  FARMS  AND  RANCHES,  1880  TO  1915,  per  Capita 


Year 

Cattle 

Sheep 

Swine 

Horses 

Mules 
and 

Chickens, 
Turkeys, 

etc.' 

1880 
1890 
1900 
1910 
1915 

0.791 
0.815 
0.908 
0.692 
0.577 

0.841 
0.571 
0.809 
0.575 
0.495 

0.992 
0.912 
0.848 
0.646 
0.640 

6  '278 
0.250 

6!  046 
0.050 

2.25 

4.54 
3.29 
3.22 

TABLE  22 

GROWTH  OF  FARMS  (PER  CAPITA),  1850  TO  1910 


Acres  of  Farmland 

Valuation  of 

Number 

Year 

of 

Farms 

Im- 
proved 

Unim- 
proved 

Farms 

Imple- 
ments 

Stock 

Prod- 
ucts 

1850 

0.0624 

4.87 

7.79 

$171 

$6.54 

$23.47 

1860 

650 

5.19 

7.76 

254 

7.82 

34.63 

1870 

690 

4.90 

5.67 

232 

8.74 

39.54 

$50.80 

1880 

806 

5.68 

5.01 

243 

8.10 

29.90 

44.12 

1890 

725 

5.68 

4.22 

.  257 

7.82 

35.10 

39.08 

1900 

752 

5.43 

5.59 

268 

9.98 

40.30 

49.34 

1910 

691 

5.20 

4.35 

445 

13.75 

53.50 

59.67 

The  historical  record  as  to  the  fruit  of  this  natural  expectation 
is  given  in  Table  20.  The  stock  which  has  been  currently 
maintained  upon  our  farms  and  ranches,  per  capita,  is  statod  in 
Table  21.  The  growth  in  area  and  pecuniary  value  of  the  farms 


376 


MODERN  ECONOMIC  TENDENCIES 


themselves  is  set  forth  in  Table  22.  The  production  of  dressed 
meat  from  our  slaughter-houses,  together  with  some  other  food- 
stuffs from  the  farms,  has  ranged  as  shown  in  Table  23. 

TABLE  23 
MEAT-SUPPLY  PER  CAPITA  PER  ANNUM,  1880  TO  1910 


Beef 

Mutton 

Pork 

Veal 

Total  Meat 

Year 

Ibs. 

Ibs. 

Ibs. 

Ibs. 

Ibs. 

1880 

52.03 

73  66 

1890 

49  50 

4.12 

57.65 

111  27 

1900 

42.23 

5.14 

68.15 

1.04 

116.56 

1905 

48.60 

5.46 

60.30 

1.93 

116.29 

1910 

47.90 

5.46 

56.68 

2.86 

112.90 

Year 

Chickens, 
and 
Turkeys 

Eggs 

Condensed 
Milk 

Peanuts 

Orchard 
Fruits 

Ibs. 

doz. 

Ibs. 

bus. 

bus. 

1880 

2.03 

9.11 

1890 

4  10 

13  0 

0  057 

2  98 

1900 

3.07 

17.0 

2.45 

0.157 

2.78 

1905 

1910 

5.31 

17.3 

5.38 

0.211 

2.35 

If  the  data  given  in  these  tables  represented  the  average  rate 
of  production  for  the  entire  decade  preceding  the  report,  in 
each  case,  they  would  present  a  perfect  picture  of  the  country's 
progress  in  the  art  of  feeding  itself.  Unfortunately  they  repre- 
sent only  the  single  year  preceding  the  year  stated,  and  so  are 
subject  to  irregularities  which  would  disappear  in  the  averaging 
of  an  entire  decade.  Thus  the  year  1915,  for  instance,  was  one 
of  extreme  dullness,  owing  to  the  recent  outbreak  of  the  Great 
War. 

Nevertheless,  since  one  commodity  is  apt  to  rise  as  some  other 
falls,  taken  broadly  they  give  a  reliable  record.  Moreover,  the 
tables  are  too  sweepingly  unanimous  in  their  general  showing  to 
be  open  to  criticism  from  any  such  a  minor  point  of  view. 


RECENT    ECONOMIC    HISTORY  377 

Our  Material  Supplies  Increasing. — The  tables  show  con- 
clusively one  thing,  namely,  that  there  has  been  no  perceptible 
diminution  in  food-supply  per  capita  during  the  sixty-odd 
years  displayed.  So  far  as  raw  cotton  and  wool  are  concerned, 
clothing  may  also  be  included  in  this  statement.  Indeed,  in 
many  staples — notably  wheat,  oats,  rice,  butter  and  cheese,  sugar, 
poultry  and  eggs — there  has  even  been  accomplished  a  marked 
increase  in  the  supplies  per  capita.  Most  remarkable  of  all,  this 
increase  has  been  most  marked  during  the  last  two  or  three 
decades !  Yet  this  is  just  the  period  during  which  prices  have 
risen  most  phenomenally ! 

Prices  and  the  Alleged  Law  of  Supply  and  Demand.— 
In  the  face  of  this  one  modest  group  of  tables  of  blanket-statis- 
tics, coupled  with  common  knowledge  as  to  the  way  in  which 
prices  have  been  rising  during  the  last  two  decades,  we  need  not 
await  refined  statistics  as  to  prices  before  sweeping  completely 
off  the  stage  any  relationship  between  prices  in  general  and  the 
common  superstition  as  to  a  law  of  supply  and  demand.  There 
is  not  to  be  found,  in  any  source  of  exact  information  yet  avail- 
able  to  the  author,  one  atom  of  foundation  for  this  well  nigh 
universal  superstition. 

While  the  relative  price  of  a  single  commodity,  in  proportion 
to  the  average,  will  frequently  be  found  obeying  this  law,  prices 
as  a  whole  pay  no  appreciable  attention  to  it.  Our  task  will  be 
best  advanced  if  the  reader  now  sweeps  that  superstition  into 
limbo  forever,  and  forgets  it. 

Prosperity  and  Discontent. — Therefore,  speaking  from  the 
broadest  possible  basis,  it  may  be  laid  down  as  a  fundamental 
rule  that  no  hypothesis  concerning  any  increase  in  the  cost  of 
living,  nor  in  difficulty  in  obtaining  employment,  nor  any  de- 
crease in  the  birth-rate,  nor  any  other  social  problem  whatever, 
may  be  explained  as  having  been  due  to  decreasing  supplies  of 
life-support;  for  there  have  been  none.  Whatever  may  be  the 
social  problem  presenting  itself  for  debate,  it  must  be  considered 
always  in  view  of  the  fact  that,  however  prices  and  other 
economic  difficulties  may  have  been  growing  upon  us  more  or 
less  steadily — with  acceleration  rather  than  constancy  of  rate — 
there  is  absolutely  no  foundation  for  any  hypothesis  of  dearth  or 
famine,  due  either  to  the  increase  in  population,  or  to  that 
growth  of  the  factory-system  which  others  allege  as  the  cause 
of  the  trouble,  or  to  that  failure  to  complete  such  growth  which 


378  MODERN   ECONOMIC   TENDENCIES 

is  alleged  in  these  pages  as  the  cause.  Whatever  may  have  hap- 
pened, or  may  have  failed  to  happen,  we  are  unquestionably 
richer  to-day,  per  individual,  on  the  average,  in  all  the  basic 
material  requisites  for  life,  than  at  any  previous  period. 

Disparity  and  Discontent. — This  being  so,  at  least  three  im- 
mediate conclusions  from  this  fact  must  be  chalked  down  as 
settled,  before  any  step  forward  into  more  complicated  questions 
may  safely  be  taken.  The  first  of  these  is  that  all  of  our  modern 
troubles  are  due  to  relative,  rather  than  to  absolute,  poverty. 
While  absolute  poverty  exists,  it  is  not  amongst  sufficiently  large 
numbers  to  threaten.  It  is  merely  the  less-rich  who,  in  enormous 
numbers,  envy  the  more-rich. 

The  Nullified  Law  of  Supply  and  Demand.— The  second 
conclusion  is  based  upon  the  obvious  fact  of  a  simultaneous  rise 
of  supplies  and  prices,  visible  now  over  two  or  three  decades. 
This  proves  that  to-day  the  law  of  supply  and  demand  is  virtually 
inoperative.  There  are  plainly  at  work  within  the  economic 
organism  some  forces,  however  unidentified  as  yet,  which  are  so 
gigantic,  in  relation  to  any  modest  and  natural  balance  between 
supply  and  demand,  that  this  last  phenomenon  is  turned  com- 
pletely topsy-turvy  thereby.  The  law  of  supply  and  demand  now 
has  about  the  same  control  over  prices  that  gravitation  has  upon 
dust  in  a  whirlwind. 

Futile  Reforms. — The  third  conclusion  is  the  futility  of  look- 
ing to  any  increase  in  our  supplies  per  capita— except  as  an 
incident  to  a  basic  reform  in  our  system  of  distribution — as  a 
remedy  for  any  economic  trouble.  Whether  it  be  vacant-lot 
gardens,  or  efficiency-engineering,  or  feeding  the  Bolsheviki  to 
keep  them  quiet,  any  social  program  which  relies  upon  a  mere 
increase  in  the  rate  of  production,  under  the  present  system  of 
distribution,  as  an  artificial  prop  to  social  stability  and  content' 
ment,  is  doomed  to  failure. 

For  we  have  already  long  had  that  remedy  at  work,  for  decades 
in  the  past ;  yet  these  ills  have  grown  up  upon  us  in  the  face  of 
it.  Obviously,  until  we  alter  the  system  itself,  in  some  factor 
more  basic  and  powerful  than  production  itself,  prices  must  con- 
tinue to  rise,  employment  to  shrink  in  a  periodic,  spasmodic  way, 
and  discontent  to  become  continually  more  violent,  in  spite  of 
increasing  supplies  per  capita.  This  prediction  can  be  put  forth 
most  confidently  for  no  more  mysterious  reason  than  that  all 
these  things  have  been  occurring  increasingly  in  the  past,  while 


RECENT   ECONOMIC   HISTORY  379 

• 

supplies  were  steadily  increasing,  per  capita,  at  the  same  time. 

The  Exception  Proves  the  Rule. — However,  to  the  con- 
tinuity of  this  past  increase  in  material  riches  per  capita  there 
have  been  some  exceptions.  The  Civil  War  created  a  temporary 
deficit  in  the  supply  of  every  commodity  except  potatoes  and  hay. 
In  the  case  of  sugar  and  rice,  both  southern  products,  this  deficit 
continued  for  several  decades  after  the  war.  But  usually  within 
a  single  decade  after  1870,  and  by  1910  in  every  case  except 
"pease  and  beans,"  this  deficit  had  been  more  than  overcome, 
and  the  food-supply  per  capita  made  more  plentiful  than  it  had 
been  in  1840  or  1850. 

Yet,  it  is  to  be  noted,  the  period  covered  ly  this  temporary 
deficit,  from  1865  to  1880  or  thereabouts,  was  not  at  all  one  of 
hard  times,  nor  poverty,  nor  discontent,  nor  particularly  one  of 
high  prices.  Very  plainly,  none  of  these  things  find  their  basis 
in  paucity  of  supply.  From  1864  to  1873  was  one  of  the  most 
prosperous  periods,  commercially  speaking,  which  this  country 
ever  enjoyed.  Prices  were  somewhat  high,  but  they  were  fall- 
ing. To-day  they  are  rising. 

Even  after  the  panic  of  1873  the  recovery  was  by  no  means  so 
slow  that  it  could  be  connected  in  any  way  with  the  slow  process 
of  increasing  our  national  food-supplies.  From  1880  to  1895 
was  a  period  of  almost  unexampled  general  prosperity. 

All  these  facts  are  of  the  utmost  significance,  as  showing  that 
our  fluctuating  prosperity,  activity  of  employment  and  welfare 
for  the  common  people  have  no  visible  relation  whatever  with 
the  magnitude  of  our  crops!  The  law  of  supply  and  demand 
is  not  at  work  to  any  visible  degree. 

Yet,  just  so  long  as  we  continue  to  be  afflicted  with  com- 
mercially subsidized  editorials  and  university-bred  political 
economy,  so  long  shall  we  rush  to  get  the  latest  news  as  to  crops 
in  order  to  estimate  coming  prosperity.  If  the  crops  be  but 
''bumper"  ones  we  shall  continue  to  forget  the  prices  of  food  out 
of  sight  overhead,  and  the  volcanic  discontent  rumbling  invisibly 
beneath  our  feet,  and  to  hug  ourselves  with  a  fool's  satisfaction. 

The  Symptoms  World-wide.— The  same  lesson  is  taught  by 
the  latter  portion  of  these  tables.  The  period  from  1907  to  1914 
was  one,  first,  of  acute  panic,  and  then  of  steady  hard  times  and 
growing  unemployment.  Prices  rose  rapidly.  The  German 
Reichstag  itself  became  excited  over  the  prices  of  food  in  October, 
1911,  while  the  New  York  Times  for  Feb.  22,  1912,  quoting  the 


380  MODERN  ECONOMIC  TENDENCIES 

Association  for  Improving  the  Condition  of  the  Poor,  stated  that 
food-prices  had  risen  25  per  cent  within  a  year. 

Such  news-items  are  but  samples  of  a  myriad  showing  the 
popular  discontent  with  the  rising  cost  of  living,  which  found 
expression  in  food-riots  in  every  country  in  the  world — in  Lon- 
don, Vienna,  Eome,  Bombay  and  Yokohama,  as  well  as  in  New 
York,  Chicago  and  San  Francisco.  A  single  page  of  the  author's 
scrap-book  of  clippings  from  the  Times  reveals  two  cases  of  fatal 
starvation  upon  the  streets  of  New  York  in  the  month  of 
January,  1912,  with  a  report  of  butter's  being  higher  in  price 
than  for  twenty-eight  years  past. 

Yet  these  past  three  decades  were  not  at  all  ones  of  a  falling 
supply  of  food,  per  capita,  but  of  markedly  the  opposite. 
According  to  the  tables,  there  had  been  a  slight  decrease  in  the 
supply  of  corn  and  wheat,  it  is  true,  but  only  a  slight  one. 
Potatoes  had  remained  about  the  same  in  quantity.  But  the 
supply  of  oats  had  risen  substantially,  by  some  fraction  varying 
from  a  quarter  to  a  third.  Butter,  the  commodity  quoted  above 
as  being  higher  in  price  than  for  twenty-eight  years  past,  had 
increased  in  supply  by  probably  fifty  per  cent !  Other  supplies 
had  increased  even  more  astonishingly.  Rice  had  increased  four- 
fold and  sugar  tenfold  in  quantity,  during  that  period;  while 
hay  had  more  than  held  its  own,  wool  had  increased  by  half,  and 
cotton,  poultry  and  eggs  had  virtually  doubled  in  quantity  avail- 
able per  capita ! 

Yet  the  result  of  all  this  horn  of  plenty,  in  its  effect  upon 
prices,  was  nevertheless  a  phenomenal  advance,  which,  arrested 
temporarily  from  1913  to  1915,  has  now  burst  forth  upon  the 
world  with  increased  virulence,  in  the  price-advance  of  1915-17. 
The  law  of  supply  and  demand  has  been  exactly  reversed  in  its 
action,  by  some  more  powerful  force  yet  to  be  identified  statis- 
tically ! 

Yet  even  now  that  we  have  a  national  food-dictator,  who  might 
be  expected  to  possess  all  the  facts,  they  are  still  trying  to  make 
us  believe  that  the  high  and  rising  prices,  and  the  irregular 
supplies,  are  due  to  sheer  dearth  of  food-stuffs,  or  of  people  un- 
willing to  work  at  agriculture!  The  facts  do  not  support  the 
allegation.  It  is  not  that  stocks  may  not  be  subject  to  hoarding 
for  speculative  purposes.  It  is  the  complete  lack  of  connection 
between  supplies  and  prices,  shown  throughout  our  entire 


RECENT  ECONOMIC   HISTORY  381 

economic  history,  but  especially  of  late,  which  is  significant. 
This  is  what  needs  to  be  investigated. 

Traffic  Charged  All  it  Will  Bear. — At  the  moment  of  com- 
pletion of  this  book  prices  are  rising  so  rapidly  that  no  estimates 
can  be  made.  There  is  not  time  to  collect  data  before  they 
become  obsolete.  Yet  very  plainly,  these  prices  are  high  without 
adequate  explanation  by  dearth.  There  is  plenty  of  material  on 
hand,  but  it  may  not  enter  the  market. 

It  is  not  that  the  dealers  personally  decline  to  trade,  or  that 
any  sort  of  exhortation,  imprisonment  or  execution,  applied  to 
any  vague  "middleman,"  would  overcome  this  reluctance.  The 
reason  is  the  very  simple  and  natural  one  that,  under  the  present 
complete  lack  of  system  for  transferring  food  from  producer  to 
Consumer,  no  dealer  can  afford  to  handle  it  except  at  a  charge 
amounting  (in  aggregate)  often  to  several  times  the  cost  of 
production. 

The  stocks  now  held  off  the  market  are  those  lots,  which,  let  us 
say,  offer  a  margin  of  only  250  per  cent  for  costs  of  doing  busi- 
ness and  profits,  when  300  per  cent  is  the  minimum  margin  which 
will  keep  this  most  inefficient  system  going.  The  food-dealers 
are  no  more  greedy  than  is  the  reader.  No  one  can  afford  to  con- 
duct business  at  a  loss,  nor  at  less  than  a  minimum  net  income. 
Everyone,  on  the  other  hand,  is  to  blame  who  does  not  denounce 
a  system — the  commercial  system — which  can  be  operated  only 
upon  margins  of  gross  profits  something  like  these  outrageous 
figures. 

That  this  is  the  real  situation  is  plain.  According  to  the  more 
reliable  daily  press,  now  that  milk  is  selling  at  fourteen  to  six- 
teen cents,  whereas  a  decade  ago  its  price  was  six  cents,  the 
farmers  are  feeding  large  quantities  of  surplus  milk  to  the  pigs! 
It  does  not  pay  to  market  it.  Now  that  potatoes  are  selling  $1.40 
or  more  a  bushel,  they  are  being  left  to  rot  in  the  fields,  or  are 
being  used  as  fodder,  by  the  hundred  million  bushels.  Yet  this 
year's  crop  of  potatoes  has  been  estimated  by  the  Government  as 
154,000,000  bushels  greater  than  last  year's  crop !  What's  the 
use! 

The  lesson  to  be  drawn  from  all  this  by  the  "man  in  the 
street"  is  to  cease  appealing  for  some  increase  or  other  in  our 
supplies  of  food,  either  as  a  remedy  for  the  high  cost  of  living 
or  as  a  war-measure,  to  stop  blaming  someone  else  for  not  going 
back  to  the  farm  to  raise  more  stuff  (to  be  left  rotting  where  it 


382  MODERN   ECONOMIC   TENDENCIES 

grew),  and  to  stop  shouting  for  some  vague  middleman  or  other 
to  be  taken  out  and  shot  for  his  avarice.  If  there  is  anyone  to 
be  shot  it  is  the  reader,  that  he  did  not  long  ago  recognise  that 
spending  money  efficiently  is  just  as  important  as  earning  it, 
that  he  did  not  get  together  with  his  neighbors  and  then  dare 
to  say  that  his  dollar  is  his  own. 

National  Vanity. — Should  the  author's  vision  in  this  matter 
incur  suspicion  of  astigmatism,  due  to  his  too  long  concentration 
upon  these  evils,  let  us  quote  the  words  of  the  Hon.  Frank  S. 
Black  before  The  Traffic  Club  of  Pittsburgh,  spoken  March  30th, 
1911,  long  before  the  Great  War  had  upset  all  our  perspectives: 

"There  are  many  phases  of  our  progress  which  emphasize 
our  danger.  We  can  manage  these  if  we  keep  our  heads  and 
take  our  time.  But  a  wise  man  in  a  hurry  will  blunder  as 
often  as  a  stupid  man  picking  his  way.  We  solve  too  many 
things  off-hand.  Their  magnitude  seems  never  to  dismay  us, 
and  because  we  have  always  landed  on  our  feet  we  seem  always 
to  expect  to  do  so.  This  mental  attitude  may  come  from  con- 
fidence, and  it  may  come  from  vanity." 

"A  large  part  of  our  fortune  is  due  not  to  our  skill,  but  to 
the  growth  and  vigor  of  the  country.  The  investment  of  a 
day's  labor  or  a  dollar  in  money  produces  here  a  bigger  yield 
than  it  has  at  any  other  time  or  place  on  earth.  This  is  not 
so  much  wisdom  as  luck.  Much  of  what  we  have  is  not  wages, 
but  bounty.  If  we  lived  in  Switzerland  or  China  we  might  be 
farming  in  a  crevice  or  wearing  wooden  shoes.  And  before 
we  get  too  puffed  up  we  would  better  see  how  much  we  have 
done,  and  how  much  has  been  done  for  us." 

The  fact  is  more  than  significant — it  is  menacing — that  in 
spite  of  the  tremendous  expansion  in  territory  and  transporta- 
tion which  this  country  has  experienced  during  the  last  sixty  or 
seventy  years,  including  the  development  of  the  New  South  and 
the  acquisition  of  Hawaii,  Porto  Eico  and  the  Philippines,  to- 
gether with  the  vast  region  here  at  home  reclaimed  from  the 
desert  by  irrigation  and  "dry  farming,"  yet  the  number,  size 
and  material  productivity  of  our  farms,  or  their  potentiality  for 
supporting  human  life,  have  all  remained  substantially  un- 
changed during  that  long  period  (if  they  have  not  gone  back- 
wards), in  proportion  to  the  population  relying  upon  them  for 
subsistence,  and  available  for  working  them. 


RECENT   ECONOMIC   HISTORY  383 

Automatic  Involuntariness  Again. — This  is  not  so  because 
we  have  not  yet  invented  implements  and  other  aids  which 
qualify  us — even  with  a  decreasing  fraction  of  the  population 
devoting  itself  to  agriculture — to  increase  our  produce  until 
every  person  is  surfeited  with  food.  It  is  so  because  our  relative 
proportions  of  population  in  town  and  country  respectively,  and 
the  proportion  of  total  productive  power  which  is  allowed  to  get 
through  to  the  Consumer,  is  controlled  rigidly  by  commercial 
forces  so  huge  and  implacable  that  any  individual  readiness  to 
produce,  whether  for  patriotic  purposes,  or  for  love  of  the  work, 
or  in  need  of  the  money,  is  impotent  to  assert  itself  with  any 
effect. 

Yet  this  control  is  not  that  of  any  individual,  nor  any  group, 
nor  class,  nor  "trust,"  nor  "interest,"  whether  swayed  by  selfish- 
ness or  by  any  other  motive.  Therefore  it  is  not  to  be  appealed 
to,  either  by  exhortation  or  by  threat,  to  relax  its  merciless  curb- 
bit  authority.  Even  those  whose  daily  activities,  as  members  of 
the  myriad  composing  the  commercial  system,  embody  the  ex- 
pression of  this  control  are  powerless  to  guide  or  arrest  it. 
Businessmen  are  as  helpless  as  wage-earners  to  mitigate  the 
severity  of  economic  conditions.  This  restriction  of  production 
below  normal  is  the  result  of  interactions  between  millions  of 
human  beings  many  of  whom  are  poor,  and  all  of  whom  are  im- 
pelled by  psychic  forces  exactly  the  same  as  yours  or  mine. 

Thus,  whatever  may  be  the  population  of  a  land,  whether 
growing  or  shrinking,  whether  ignorant  or  educated,  if  it  be 
organized  industrially  upon  the  commercial  plan  its  production 
per  capita  will  always  be  less  than  the  hundred-per-cent  normal 
fitting  its  particular  grade  of  ability  to  produce.  The  population 
may  be  increased  mightily  by  immigration,  or  decimated  by  war 
or  pestilence ;  this  has  no  effect  upon  this  proportion.  Political 
liberty  or  education,  either  in  civil  government  or  in  technique 
of  agriculture  and  manufacture,  only  magnify  this  proportion  of 
deficit  in  production  below  normal  productivity;  for  in  all  those 
countries  which  have  had  most  of  these  things  they  have  been 
devoted  chiefly  to  the  intensifying  of  commercial  combat,  and 
hence  to  the  increase  of  this  proportional  deficit,  rather  than  to 
increasing  production  by  decreasing  commercial  combat. 

This  is  why  vacant-lot  gardening,  for  instance,  has  not  in- 
creased our  output  of  garden-truck,  per  capita;  nor  has  it 
decreased  it.  This  is  why  efficiency-engineering,  or  the  cultiva- 


384  MODERN   ECONOMIC   TENDENCIES 

tion  of  technique  with  faddish  zeal  in  any  line,  has  done  neither 
good  nor  harm,  in  terms  of  social  discontent.  So  long  as  our 
activity  in  commercialism  remains  unchanged  the  most  praise- 
worthy efforts  at  expanding  production,  or  our  most  foolish 
errors  in  disregarding  it,  can  work  neither  good  nor  harm  on 
this  proportion  of  actual  to  normal  maximum  productivity.  Our 
successes  will  merely  squeeze  out  into,  and  our  errors  bring  back 
from,  this  big  margin  between  the  actual  and  the  normal,  enough 
to  keep  the  proportion  constant. 

Increase  in  Technical  Wealth. — Before  leaving  this  question 
of  material  life-support  it  must  be  noted  that  other  forms  of 
material  aids  to  life  than  the  raw  materials  for  food  and  clothing 
have  also  become  increasingly  available,  per  person.  While  sup- 
plies leading  to  food  and  clothing  have  been  merely  holding  their 
own,  or  increasing  moderately,  those  for  the  mechanic  arts  have 
advanced  by  leaps  and  bounds.  The  facts  are  shown  in  Table  24. 

If  attention  be  turned  to  Table  14,  showing  the  distribution 
of  the  nation's  efforts  among  the  broader  classes  of  vocation,  the 
explanation  of  this  remarkable  exhibit  of  Table  24  appears. 
Reducing  the  percentages  of  Table  14  to  those  of  population,  it 
develops  that  during  the  last  ninety  years  the  agricultural 
vocations  have  fallen  from  21.4  to  13.7  per  cent  of  the  industrial 
population.  During  that  same  time  the  two  classes — "Manufac- 
turing and  Mechanical/'  which  deals  directly  with  the  raw 
materials  of  Table  24,  and  "Professional,"  which  deals  largely 
with  the  training  of  such  men — have  increased  from  an  aggre- 
gate of  not  over  3.6  per  cent  in  1820  to  nearly  four  times  that 
figure  in  1910. 

But  the  striking  fact  is  that  the  tremendous  decrease  in  the 
relative  population  devoted  to  agriculture  has  not  led  to  any 
decrease  at  all  in  the  supply  of  food-stuffs,  but  rather  to  the 
opposite.  The  explanation  is  that  the  many  aids  to  agriculture, 
and  to  the  transportation  of  its  products,  which  have  been 
derived  from  the  growing  technical  classes,  have  been  sufficient 
not  only  to  counterbalance  the  diminution  in  agricultural  effort 
by  an  even  larger  ratio,  but  also  to  leave  the  bulk  of  the  stuff 
shown  in  Table  24  as  a  net  gain! 

Automatic  Invohmtariness  Again. — Apparently  it  should  be 
easy,  from  this  enormous  margin  of  material  profit  which  the 
nation  has  been  able  to  take  in  the  form  of  technical  devices,  for 
it  to  do  what  it  chooses  in  the  way  of  expanding  its  food-supply, 


RECENT   ECONOMIC   HISTORY 


385 


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386  MODERN    ECONOMIC    TENDENCIES 

in  order  to  keep  down  the  cost  of  living.  Academically  this  is  so. 
If  we  could  forget  the  traditions  which  explain  everything  in 
terms  of  individual  psychology,  and  turn  our  attention  to 
national  organization  instead,  all  riches  might  be  ours. 

But  in  reality  the  country  is  now  so  shackled,  by  its  super- 
stitious devotion  to  the  peculiar  economic  system  which  it  has 
adopted,  or  inherited,  that  it  is  not  only  impossible  for  it  to 
devote  a  larger  portion  of  its  energies  to  the  extraction  of  larger 
volumes  of  food-stuffs  if  it  wished,  but,  even  if  it  overcame  this 
obstacle  and  forced  the  population  back  to  the  farms,  whither 
the  money  will  not  go,  those  larger  volumes  of  supply  would  not 
bring  down  the  price  of  food!  They  could  not  even  reach  the 
retail  market! 

Manufactured  Wealth. — It  is  of  course  well  known  that  the 
technical  arts  have  also  accomplished  a  huge  development  of 
finished  products  made  from  the  raw  materials  of  Table  24,  in 
addition  to  the  raw  materials  themselves,  and  that  these  all  aid 
life  materially.  But  these  manufactured  articles  cannot  be 
measured  in  physical  units,  as  can  the  materials,  but  only  in 
terms  of  money-valuation.  A  coat  or  dress,  for  instance,  may 
mean  all  manner  of  quantities  of  value  produced  in  manufacture, 
whereas  a  pound  of  cotton  or  silk  is  a  fairly  standardized  thing. 
Hence,  since  it  is  our  policy  here  to  rely  only  upon  indicators  of 
economic  progress  which  are  independent  of  the  varying  value  of 
gold,  on  the  one  hand,  and  the  still  more  widely  fluctuating 
scales  of  wages  and  prices  on  the  other,  conclusions  will  be  based 
primarily  and  most  surely  upon  the  statistics  as  to  raw  materials. 
Most  surely  of  all,  they  must  be  based  upon  the  relative  distri- 
bution of  different  sorts  of  human  energy. 

In  pursuance  of  this  policy  the  argument  will  return  to  Table 
14  and  carry  its  broad  distinctions  further  into  detail.  In  doing 
this  it  will  be  more  convenient,  when  not  expressing  results  as 
percentages,  to  reduce  them  to  terms  of  a  million  inhabitants, 
rather  than  to  a  per-capita  basis. 

Women  in  Gainful  Employment. — One  of  the  fundamental 
features  of  the  economic  condition  of  any  land  is  the  proportion 
of  its  women  engaged  in  gainful  occupations  outside  the  home. 
Thus  Table  25  shows  the  steady  and  inevitable  gravitation,  or 
expulsion,  of  woman  from  the  home  into  the  factory.  The  first 
column,  when  viewed  as  a  result  of  the  last  column,  shows  how 
woman  is  being  forced  out  of  domesticity  by  economic  pressure, 


RECENT   ECONOMIC   HISTORY 


387 


and  how  the  race  is  suffering  thereby.    That  is  to  say,  the  pro- 
portion of  women  to  men  is  diminishing. 

TABLE  25 
WOMEN  IN  INDUSTRY  (PER  CENT),  1870  TO  1910" 


"Occupied" 

Proportions  of  Entire  Sex 

Women  in 

Women  to 

"Occupied" 

Year 

Total 

Total 

Population 

"Occupied" 

Population 

Men 

Women 

1870 

49.5 

14.7 

74.8 

13.1 

1880 

49.0 

15.2 

78.8 

14.7 

1890 

48.7 

17.2 

77.8 

17.0 

1900 

48.6 

18.3 

79.4 

18.8 

1910 

48.3 

21.2 

81.2 

23.4 

Although  the  next  to  the  last  column  shows  that  men  are  also 
under  this  pressure,  yet  the  middle  column  eliminates  all  modi- 
fiers and  shows  exactly  the  degree  to  which  our  industrial 
population  is  becoming  female.  In  all  the  columns  the  figures 
for  1900  and  1910  show  the  recent  marked  acceleration  of  all 
these  processes,  due  to  the  rapidly  increasing  stress  of  com- 
mercial combat. 

The  Tariff,  Commercialism  and  Progress. — Those  of  us  who 
have  listened  for  decades,  and  with  steadily  growing  impatience, 
to  arguments  based  upon  the  idea  that  the  tariff  was  the  foremost 
force  controlling  American  destinies,  appealing  to  prejudice 
against  European  conditions  for  American  labor,  will  find  in- 
teresting this  record  in  Table  25.  For  it  shows  how  the  pressure 
due  to  that  same  commercialism  which  has  sedulously  fostered 
the  tariff  is  steadily  transforming  the  earlier  America  of  free 
husbandry,  with  womankind  busy  in  her  own  home,  into  a 
parallelism  with  those  lands  where  the  women  regularly  perform 
the  field-labor  and  help  tow  the  canal-boats. 

The  Nation's  Occupations  Analyzed. — Those  who  seek 
minute  accuracy  in  the  classifications  of  occupations  in  the 
United  States  census  will  not  be  satisfied,  at  least  with  the  data 
for  the  earlier  decades.  Thus  the  census-report  for  1900  says: 


388  MODERN   ECONOMIC   TENDENCIES 

"This  brief  review  of  the  development  of  the  'occupation' 
enquiry  makes  it  evident  that  there  has  been  no  fixed  classi- 
fication or  arrangement  of  occupations  in  the  reports  of  the 
successive  Federal  censuses.  Under  the  system  of  a  temporary 
census-organization  prevailing  up  to  the  present  time,  the 
officials  of  each  succeeding  census  had  no  means  of  knowing, 
in  detail,  the  methods  and  plans  of  their  predecessors." 
(Italics  mine.) 

But  this  holds  true  only  for  the  finer  points.  In  attempting, 
as  we  are  here,  to  compress  into  a  single  volume  an  outline  of  all 
past  American  economic  evolution,  the  first  duty  is  to  get  the 
biggest  forces  right.  For  us  who  are  inquiring  only  for  the 
real  nature  and  approximate  size  of  those  gigantic  changes  in 
our  economic  system,  the  rough  outlines  of  which  have  long  been 
so  apparent  as  to  need  no  statistical  proof,  such  minor  discrep- 
ancies need  not  be  recognized  as  real  obstacles.  For  our  purposes 
large  numbers  of  occupations  must  be  swept  into  a  single  class, 
and  in  this  process  the  discrepancies  of  each  tend  to  annul  one 
another. 

We  are  now  engaged  upon  an  enterprise — the  quantitative 
analysis  of  our  national  dissipation  of  economic  energy — which 
may  not  be  neglected  longer,  if  the  nation  is  to  remain  stable  and 
under  control.  If  the  census,  our  sole  statistical  guide  which  is 
competent  in  range  of  time  and  matter,  is  to  be  discarded  because 
of  microscopic  inaccuracies,  then  we  are  lost  indeed.  The 
country  may  then  never  hope  for  an  effective  science  of  sociol- 
ogy, fit  to  serve  as  a  foundation  for  statecraft.  For  it  certainly 
lacks  one  now,  and  no  school  of  sociologists  gives  sign  of  daring 
to  create  one — chiefly  because  of  fear  of  making  an  error  in  the 
fifth  decimal  place. 

But  the  census-data,  when  viewed  in  this  broader  aspect,  show 
few  signs  of  imperfection.  Indeed,  if  the  major  conditions  of 
enumeration  are  kept  in  mind,  they  become  remarkably  con- 
sistent. And  finally,  the  censuses  of  1900  and  1910,  which  are 
of  the  greatest  importance  of  all,  in  that  they  reveal  a  marked 
acceleration  of  those  tendencies  which  are  broadly,  if  more 
vaguely,  foreshadowed  throughout  the  entire  preceding  half- 
century,  are  markedly  in  accord  with  each  other  in  the  care  and 
accuracy  with  which  separate  occupations  have  been  defined  and 
classified. 

It  is  too  bad  that  even  so  late  as  1910  no  recognition  whatever 


RECENT   ECONOMIC   HISTORY  389 

of  the  basic  importance  of  distinguishing  commercially  combat- 
ive effort  broadly  from  productive  occupations  is  manifested. 
But  this,  of  course,  is  too  much  to  ask.  The  census  as  it  stands 
is  a  splendid  achievement,  worth  far  more  than  it  has  cost,  and 
has  now  become  invaluable  as  our  sole  guide,  based  upon  the 
past,  through  the  most  threatening  period  of  our  history.  In  a 
day  when  all  science,  and  particularly  all  economic  science,  is 
guilty  of  over-devotion  to  microscopic  detail,  to  the  neglect  of 
fundamental  principles,  it  is  a  pleasure  to  recommend  a  study 
of  the  census  over  the  heads  of  those  who  cavil  at  it. 

Variations  in  Standard. — The  first  difficulty,  for  present 
purposes,  arises  in  the  fact  that  the  censuses  before  1870  did  not 
enumerate  as  to  occupations  the  same  portion  of  the  population 
as  later  censuses;  and  it  is  important  to  go  back  to  1850.  Thus 
the  census  for  1850  enumerated  only  the  occupations  of  free 
males  of  sixteen  or  over.  The  census  of  1860  apparently 
included  also  the  free  females  of  sixteen  or  over,  although  it  does 
not  so  state  positively.  But  the  enumerations  for  1870  and 
thereafter  positively  included  both  sexes  of  ten  years  of  age  or 
over. 

Thus  the  decade  of  1860-70,  which  also  included  the  Civil 
War,  shows  some  marked  contrasts  with  the  other  decades.  This 
is  due  to  the  entrance  into  the  records  at  this  point  of  both  the 
former  slave  population,  which  was  almost  purely  agricultural 
or  domestic,  and  also  all  persons  between  ten  and  sixteen  years 
of  age,  most  of  whom  were  either  in  the  shops  or  mills,  or  were 
"help"  on  neighboring  farms  or  households,  when  gainfully  em- 
ployed at  all.  This  and  the  very  rapid  extension  of  our  railroad- 
system  westward  during  the  two  decades  from  1860  to  1880,  with 
its  enticement  of  labor  to  new  farmlands,  explains  how,  in  the 
face  of  a  generally  recorded  relative  decline  of  agriculture,  the 
proportion  of  "farmers  and  farm-laborers"  apparently  reached 
its  maximum  as  late  as  1880. 

For  these  reasons  there  has  been  added  to  the  enumerated 
populations  for  1850  and  1860,  in  the  following  analysis, 
estimated  numbers  of  slaves  of  an  industrial  age  (assumed  to 
include  all  between  the  ages  of  fifteen  and  seventy).  It  is 
assumed  that  in  1850  these  slaves,  then  about  1,400,000  in 
number,  were  three-quarters  of  them  devoted  to  agriculture 
and  one-quarter  to  domestic  labor.  For  1860,  when  the  cor- 
responding number  was  1,730,000,  these  proportions  were 


390 


MODERN   ECONOMIC   TENDENCIES 


assumed  to  have  altered  to  four-fifths  and  one-fifth  respectively. 

This  addition  of  estimated  slave-labor  makes  no  difference 
in  the  nature  of  our  conclusions,  but  probably  makes  them 
more  accurate  quantitatively.  It  reduces  the  slight  discon- 
tinuity still  visible  in  the  records  between  the  earlier  and  the 
later  decades. 

Basic  Statistics. — From  this  basis  have  been  produced  two 
analytical  tables  of  contrasted  sorts  of  occupation,  Tables  27 
and  28.  In  these  tables  all  the  occupations  appearing  in  the 
census-reports  have  been  segregated  into  two  broad  classes,  and 
each  broad  class  into  sub-classes,  as  follows: 

TABLE  26 
CLASSIFICATION  OF  OCCUPATIONS 


CLASS  I.  PRODUCTION  (Table  27) 

(a)  Agricultural  and  Food-supply. 

(b)  Textile  and  Clothing. 

(c)  Mechanical,  including  Mining. 

(d)  Transportation  and  Communica- 

tion. 

(e)  Professional. 
(/)    Technical, 
(g)  Domestic. 

(h)  Miscellaneous. 


CLASS  II.  COMMERCIAL  COMBAT 
(Table  28) 

0')  Occupations  Directly  and  Solely 
Concerned  with  Ownership, 
Prices,  Property,  etc. 

(k)  Mercantile;  Commercial,  but 
also  concerned  in  some  de- 
gree with  care  of  Stock  of 
Goods. 

(0  Makers  of  Munitions  and  Pano- 
ply of  Commercial  Militar- 
ism; Apparently  productive, 
but  in  reality  not  so. 

(m)  Divertive,  Absorbent  and  other- 
wise Dissipative;  Makers  or 
purveyors  of  the  sorts  of 
thing  peculiarly  adapted  to 
the  taste  of  the  commercial 
fighter,  the  recipient  of  un- 
earned income,  or  others 
under  abnormally  light  or 
heavy  economic  pressure; 
also  makers  of  other  things 
peculiarly  associated  with 
commercial  militarism, 
though  not  inseparably  iden- 
tified with  it. 


Along  these  lines  of  classification   all  numbers  of  persons 
variously  occupied  have  been  reduced  to  proportions  per  million 


RECENT   ECONOMIC   HISTORY  391 

inhabitants  of  total  population,  and  recorded  in  Tables  27  and 
28.  Figures  appearing  in  parenthesis  indicate  estimates  based 
upon  preceding  rates  of  growth. 

The  Nation's  Economic  Skeleton. — Tables  27  and  28  con- 
tain in  skeleton  the  entire  story  of  our  economic  past.  Their 
meaning  is  not  immediately  obvious,  because  of  the  mass  of 
detail,  which  is  of  interest  only  to  technical  readers.  But  this 
meaning  will  be  crystallized  out  gradually  in  the  course  of  the 
following  argument,  leading  up  to  Tables  43  to  47,  all  of  them 
based  on  Tables  27  and  28,  whereby  the  matter  will  be  boiled 
down  to  an  outline  placing  the  lesson  of  it  all  before  the  reader 
in  a  more  condensed  form. 

This  lesson,  however,  may  be  discerned  from  even  a  cursory 
glance  over  Tables  27  and  28,  so  far  as  its  major  features  are 
concerned.  For  the  one  fact  which  stands  out  there  most 
prominently  is  the  one  which  is  of  the  greatest  significance  and 
importance  in  the  interpretation  of  present-day  history, 
namely,  that  nothing  connected  with  modern  civilization, 
whether  economic,  ethical  or  political,  has  ever  grown  in  the 
past,  or  is  now  accelerating  in  growth,  at  anything  like  the  rate 
evinced  by  commercialism.  Neither  science,  religion,  philos- 
ophy, technology,  industry  nor  charity  is  playing  anything  like 
the  part  in  modern  progress  that  commercialism  does. 

Table  29. — The  first  step  in  sugaring  off  this  dilute  mass  of 
statistics  in  Tables  27  and  28  is  to  reduce  it  to  a  number  of 
totals  significant  of  what  is  to  be  brought  out.  This  is  done  in 
Table  29.  But  because  the  analysis,  from  this  point  forward, 
necessarily  takes  on  a  flavor  of  personal  interpretation,  Tables  27 
and  28  have  been  given  in  full,  to  mean  to  each  technical  reader 
what  they  may. 

Quantity  x. — It  has  been  noted  that  all  during  these  decades 
there  was  busy  at  productive  tasks,  chiefly  domestic  and  agricul- 
ture, a  number  of  workers  who  escaped  enumeration  because 
they  were  not  technically  "gainfully"  occupied.  That  is  to  say, 
they  were  not  earning  wages.  Instead,  they  worked  about  the 
house,  or  on  the  farm,  for  board,  lodging  and  clothing.  No  con- 
clusion as  to  relative  energies  going  to  production  and  commer- 
cialism respectively  can  be  reliable  without  some  estimate  of 
this  population. 

The  only  basis  for  such  an  estimate  lies  in  the  indubitable 
facts  (1)  that  the  proportion  of  total  population  actively  occu- 


392 


MODERN   ECONOMIC   TENDENCIES 


TABLE 
TOTAL  AND  PRODUCTIVE 


1850 


TOTAL  POPULATION  of  the  United  States 

TOTAL  ENUMERATION:  All  Occupations  (slaves  estimated) 
Per  Cent  of  Total  Population 


23,191,876 
6,771,876 
29.2 


"EMPLOYED"  PER  MILLION  INHABITANTS: 

TOTAL  ENUMERATION:  All  Occupations  (slaves  estimated)  291,99 

CLASS  I:   PRODUCTIVE  POPULATION: 

(a)  Agriculture  and  Food-supply:  Farmers  and  farm-laborers, 
diarymen,  gardeners,  stock-herders,  lumbermen, 
fishermen  and  oystermen  and  makers  of  agricultural 

implements  and  fertilizers 148,300 

Butchers  and  slaughter  and  packing-house  men 775 

Flour  and  grist-mill  men 1,200 

Food-preparation  factories 

Cottonseed  oil  and  cake 

Total  (a) 150,275 

(6)  Textile  and  Clothing:  Bleachery  and  dye-works,  carpet- 
factory,  cotton-goods,  hosiery  and  knit  goods,  silk- 
mill,  and  woolen  and  worsted  goods  hands 6,215 

Button,  corset  and  women's  clothing  factories (147) 

Dressmakers,  seamstresses,  tailors  and  tailoresses;  mil- 
liners and  millinery  factories;  lace  and  embroidery 
makers;  artificial  flowers  and  feathers;  paper  pat- 
terns   2,255 

Men's  furnishings (10) 

Sewing-machine  makers  and  repairers (30) 

Shoe  and  leather  makers (6,000) 

Upholstery  makers 

Total  (6) 14,717 

(e)  Mechanical:  Blacksmiths,  boilermakers,  foundrymen; 
brass,  copper,  lead,  iron,  steel,  and  zinc  workers; 
machinists,  mechanics;  model  and  pattern  makers; 
plumbers  and  steam-fitters;  engineers  and  firemen; 
carpenters  and  cabinetmakers;  saw  and  planing-mill 
men;  masons  and  plasterers;  painters,  glaziers  and 

glassmakers 21,560 

Miners  and  quarrymen,  stone  and  marble  cutters. . .  .  4,030 

Makers  of  cement,  lime,  paint  and  explosives 

Makers  of  electrical  machinery 


Total  (c) 


25,726 


(Table  27  continued  on  pages  394  and  395) 


RECENT  ECONOMIC   HISTORY 


393 


27 

OCCUPATIONS,  1850  TO  1910 


1860 

1870 

1880 

1890 

1900 

1910 

31,443,321 
9,965,557 
31.7 

38,558,371 
12,505,923 
32.5 

50,155,783 
17,392,099 
34.7 

62,947,714 
22,735,661 
36.1 

75,994,575 
29,073,233 
38.3 

91,972,266 
38,167,336 
41.5 

316,937 

324,337 

346,762 

361,183 

382,570 

414,987 

147,900 
(1,055) 
882 

154,300 
(1,450) 
1,515 
(10) 

154,600 
2,065 
1,165 

27 

146,300 
2,387 
753 
55 

137,000 
2,498 
486 
107 

137,600 
(2,476) 
429 
163 

6 

17 

66 

94 

144 

185 

149,843 

157,292 

157,923 

149,589 

140,235 

140,853 

5,902 
220 

8,090 
(50) 
73 
5,797 
102 

7,009 
363 

6,640 
(125) 
189 

5,227 
158 

7,505 
711 

8,515 
223 
235 
4,464 
208 

7,692 
797 

11,298 
330 

(225) 
4,040 
407 

8,210 
1,316 

11,182 
397 
(215) 
3.300 
405 

9,132 
2,041 

10,745 
418 
210 
3,430 
220 

20,234 

19,711 

21,861 

24,789 

25,025 

26,196 

21,584 
7,400 
175 

27,342 
4,970 
311 

27,361 
5,630 
229 
25 

34,378 
7,122 
355 
140 

34,702 
8,100 
416 
538 

41,727 
10,360 
639 
949 

29,159 

32,623 

33,245 

41,895 

43,756 

53,675 

(Table  2 

7  continued  or 

i  pages  394  an 

d395) 

394 


MODERN  ECONOMIC  TENDENCIES 


TABLE 


1850 


PRODUCTIVE  POPULATION— Continued 

(d)  Transportation  and  Communication:  Automobile,  bicycle 

and  motorcycle  makers,   chauffeurs  and   garage- 
keepers 

Carriage  and  wagon  makers 604 

Draymen,  hackmen,  teamsters  and  livery-stablemen.  1,876 

Post  Office  (gross  income ^-$1000) 237 

Railroads  (steam  and  electric),  telegraph  and  tele- 
phone, boatmen  and  sailors 4,671 

Total  (d) 7,338 

(e)  Professional:  Clergymen 1,158 

Dentists  and  veterinarians 128 

Physicians,  surgeons  and  makers  of  surgical  appliances  1,759 

Total  (e) 3,045 

(/)  Technical:  Architects,  designers  and  draftsmen 33 

Engineers  (civil,  electrical,  mining  and  mechanical) . .  92 

Journalists 65 

Librarians 

Teachers,  professors,  literary  and  scientific  persons. .  1,340 

Total  (/) 1,530 

(0)  Domestic:  Housekeepers,  stewards,  servants  and  waiters  (31,000) 

(h)  Miscellaneous  Occupations 39,266 

Grand  Total  "  Productive  "  .  .  272,897 


pied  in  all  lines  together  has  probably  been  about  constant,  or  in 
any  event  has  not  increased,  since  the  beginning — the  increase 
in  enumeration  coming  solely  from  a  transfer  of  labor  from 
home  to  factory ;  and 

(2)  that  this  process  of  transfer  must  now  be  nearly  finished 
— so  much  so  that  it  is  safe  to  assume  that  by  1920  it  will  have 
been  completed.  Working  from  these  assumptions,  by  exter- 
polating  the  third  line  of  Table  21  to  reach  1920,  it  appears  that 
this  constant  proportion  of  total  population  which  has  been 
busily  occupied  probably  amounts  to  at  least  ^35,000  per  million. 

Next  it  is  safe  to  assume  that  the  portion  of  this  435,000 


RECENT  ECONOMIC  HISTORY 


395 


27 — Continued 


1860 

1870 

1880 

1890 

1900 

1910 

29 

260 

1,617 

1,180 
2,640 
271 

4,465 

1,435 
3,351 
513 

6,448 

1,054 
3,824 
665 

7,157 

1,057 
6,285 
967 

10,168 

967 
7,501 
1,340 

11,238 

761 
9,099 
2,437 

21,980 

8,556 

11,747 

12,710 

18,506 

21,306 

35,894 

1,194 
190 
1,754 

1,137 
233 
1,620 

1,290 
287 
1,719 

1,402 
381 
1,677 

1,526 
495 
1,753 

1,283 
562 
1,768 

3,138 

2,990 

3,296 

3,460 

3,774 

3,608 

54 
(140) 
108 
2 
3,620 

86 
191 
137 
5 
3,?36 

123 

165 
245 
(12) 
5,160 

277 

687 
347 
(26) 
5,700 

387 
1,231 
394 
55 
6,095 

686 
2,228 
374 
116 
7,160 

3,924 

3,755 

5,705 

7,037 

8,162 

10,564 

30,690 
46,549 

25,950 
37,735 

23,040 
48,632 

24,580 
34,409 

21,370 
50,318 

22,360 
30,324 

292,093 

291,803 

306,412 

304,265 

313,946 

323,474 

which  escaped  enumeration  in  the  past  was  always  occupied  at 
productive  tasks,  either  in  the  field  or  in  the  house.  Therefore 
this  quantity,  which  is  called  x  in  Table  29,  belongs  with  the 
purely  productive  classes  of  occupation.  It  is  found  by  subtract- 
ing from  435,000,  at  each  decade,  the  total  enumeration  per 
million  of  total  population. 

If  we  are  not  to  assume  that  this  quantity  x  fairly  represents 
the  migration  from  tasks  within  the  home  or  upon  the  farm  to 
those  within  the  factory,  then  we  would  be  forced  to  conclude 
that  the  steady  increase  in  those  enumerated  as  "occupied" 
proves  that  this  nation  must  steadily  have  been  becoming  increas- 


396 


MODERN  ECONOMIC  TENDENCIES 


TABLE 

CLASS  II — COMMERCIALLY 
Personnel  per  Million  of 


1850 


(j)  Directly  Combative,  or  those  concerned  solely  with  Markets, 
Ownership,  Price  or  Property: 


Agents 334 

Bankers  and  Stock-brokers , 135 

Commercial  Travelers (50) 

Manufacturers  and  Officials 976 

Officials  of  Banks  and  Companies 59 

Total  0") 

(fc)  Mercantile: 

Hucksters  and  Pedlars 460 

Merchants:  Wholesale  and  Retail 7,505 

Porters  and  helpers  in  stores 

Total  (fc) 8,102 

(0  Munitions  and  Panoply  of  Commercial  War: 

Blank-books  and  bookbinding 149 

Bookkeepers,  accountants,  clerks,  copyists,  salesmen 

and  saleswomen,  and  stenographers 4,370 

Fancy   and   paper   boxes,    labels   and   tags,   wooden 

packing-box  makers (56) 

Lawyers 1,033 

LIGHT:       Petroleum-refining,     gas,      electricity,     gas 

and  electric  fixtures 51 

Messengers,  office-boys,  etc (100) 

Paper  and  wood-pulp,  envelopes  and  paper-bags (423) 

Printers,  printing-materials,  lithographers,  pressmen.  .  642 

Scales  and  balances,  show-cases,  signs  and  advertising 

novelties 

Typewriters    and   supplies,    cash   registers    and    cal- 
culating machines,  lead-pencils  and  fountain-pens, 

Total  (I) 6,932 


(Table  28  continued  on  pages  398  and  399) 


RECENT   ECONOMIC   HISTORY 


397 


28 

COMBATIVE  OCCUPATIONS 
Total  Population 


1860 

1870 

1880 

1890 

1900 

1910 

810 
307 
(100) 
724 
96 

527 
276 
188 
1,480 
260 

677 
386 
561 
1,387 
310 

2,775 
572 
932 
2,128 
634 

3,160 
960 
1,217 
3,185 
971 

4,112 
774 

1,778 
6,170 
1,561 

2,037 

2,731 

3,321 

7,041 

9,493 

14,395 

631 
8,520 
324 

890 
9,270 
817 

1,066 
9,560 
742 

939 
10,985 
(700) 

1,004 
10,920 
710 

874 
10,910 
1,471 

9,475 

10,977 

11,368 

12,624 

12,634 

13,255 

152 

200 

211 

219 

209 

217 

5,935 

8,060 

10,700 

16,110 

21,080 

31,580 

116 

1,108 

257 
1,056 

354 
1,280 

517 

1,425 

660 
1,500 

839 
1,328 

297 
(150) 
708 
756 

349 
226 
966 
1,084 

567 
279 
1,053 
1,454 

737 

816 
1,022 
1,967 

1,021 
938 
1,366 
2,040 

1,550 
1,275 
1,745 
2,480 

24 

35 
4 

43 

8 

43 
62 

(62) 
116 

136 

240 

9,397 

12,700 

17,023 

24,351 

31,157 

44,118 

(Table  28  continued  on  pages  398  and  399) 


398 


MODERN  ECONOMIC  TENDENCIES 


TABLE 


1850 

(m)  Divertive,  or  Absorbent  of  Unearned  Incomes: 
Actors,  showmen,  etc 

32 

Artists,  musicians,  and  teachers  of  art  or  music  

243 

Barbers  and  hairdressers  

259 

Bartenders,  saloon  and  restaurant  keepers  
Boarding  and  lodginghouse  keepers   

236 
110 

Confectionery  and  cocoa  products,  soda  and  mineral 
water,  and  apparatus 

100 

Cigars  and  cigarettes  

(130) 

Jewelry  etc 

(180) 

Launderers  and  laundresses 

(900) 

Liquors:  Distilled  and  malt  

274 

Patent  medicines 

36 

Perfumery  and  cosmetics                                 .        ..'.... 

8 

Phonograph  and  photographic  apparatus 

Total  (m)  

2,508 

Grand  Total  "Commercially  Combative"  

19,096 

ingly  industrious  since  1850.  But  this  is  unbelievable.  There 
is  no  evidence  to  uphold  this  idea,  and  there  is  much  against  it. 

America  in  1850. — The  earlier  decades  of  our  history  were 
times  of  indefatigable  toil,  on  the  part  of  almost  all  classes.  In 
1850  the  law-offices  of  our  best  known  congressmen  often  opened 
at  five  in  the  morning,  to  meet  the  farmers  and  market-people. 
The  universities  began  their  lectures  at  six  or  seven  o'clock,  while 
the  laboring  industries  ran  "from  dawn  to  dark,"  winter  and 
summer. 

There  were  then  few  slums,  it  is  true,  and  no  great  barracks 
of  tenements  or  enormous  factories,  with  their  armies  of  work- 
men, as  we  now  know  them.  But  on  the  other  hand  both  men 
and  women,  and  even  children,  then  toiled  under  another  and 
equally  hard,  if  a  more  fair  and  free,  taskmaster — the  natural 
obstacles  of  an  unconquered  continent.  Agitation  for  an  eight- 
hour  day,  now  so  widely  accomplished,  would  then  have  been  a 
joke. 

There  were  then  no  women's  clubs  at  all,  and  few  even  for  men. 
Most  of  our  older  men's  clubs  were  founded  during  the  'sixties. 


RECENT   ECONOMIC   HISTORY 


28 — Continued 


1860 

1870 

1880 

1890 

1900 

1910 

56 

84 

148 

441 

456 

768 

473 

491 

790 

1,344 

1,534 

1,884 

354 

621 

894 

1,350 

1,718 

2,123 

473 

1,316 

1,657 

2,326 

2,705 

2,505 

382 

332 

390 

705 

934 

1,798 

97 

226 

260 

466 

497 

679 

254 

674 

1,062 

1,382 

1,357 

1,516 

190 

264 

258 

222 

275 

336 

1,229 

1,580 

2,430 

3,950 

5,060 

7,215 

376 

456 

651 

557 

567 

663 

34 

63 

80 

112 

152 

120 

17 

19 

15 

22 

23 

26 

3 

25 

62 

112 

3,935 

6,126 

8,638 

12,902 

15,340 

19,745 

24,844 

32,534 

40,350 

56,918 

68,624 

91,513 

An  afternoon  at  bridge  would  then  have  ostracized  any  respect- 
able housewife,  as  a  wanton  idler  inviting  moral  dissolution. 
Virtually  everyone  dined  at  noon.  Only  the  very  well-to-do 
dressed  for  evening,  to  the  extent  of  putting  on  "something 
fresh"  for  supper  at  six.  Afternoon-tea  was  unheard  of. 

Diversion  and  recreation,  as  we  now  know  them,  were  then  all 
but  non-existent.  Holidays  were  rare.  Neither  Lincoln's  Birth- 
day nor  Memorial  Day  had  been  thought  of.  Even  the  giving  of 
Christmas  gifts  had  then  barely  lifted  its  head  as  a  popular 
institution.  Dancing,  cards  and  the  theater  were  frowned  upon 
by  the  church  and  discountenanced  in  the  better  homes. 

Virtually  none  of  the  houses  had  verandas,  for  one  would 
be  so  idle  as  to  sit  upon  them  by  daylight,  and  "night  air"  was 
thought  to  be  deadly.  Pleasure-driving  was  an  unusual  indul- 
gence, regarded  as  a  natural  folly  of  youth,  and  even  walking 
for  recreation  on  Sunday  was  generally  accepted  as  ticketing  the 
sinner  straight  for  hell. 

Sport  was  in  its  infancy.  Yachting  was  just  carving  out  its 
earliest  history,  the  "America"  cup  having  then  not  yet  been 


400  MODERN   ECONOMIC   TENDENCIES 

contested  the  first  time.  The  first  Yale-Harvard  boat-race  had 
yet  to  be  rowed.  Golf,  tennis,  football,  hockey,  squash,  racquets, 
bicycling,  polo  and  other  sports  now  current  and  at  one  time 
rampant,  were  then  unknown.  Even  baseball  and  billiards  were 
all  but  so. 

There  were  few  cities  of  appreciable  size,  and  even  they  had 
meager  resources  for  diversion.  For  recreation  the  back-districts 
relied  upon  corn-huskings,  house-raisings  and  prize-fights — in  the 
last  of  which  Theodore  Eoosevelt  describes  the  gouging  out  of 
eyes  as  common  practice  within  the  rules.  P.  T.  Barnum  was 
then  only  starting  his  wonderful  career  as  an  entertainer  of  toil- 
worn,  monotony-crazed  country-folk,  striking  the  keynote  of 
popular  demand  of  the  times  with  his  "the  public  loves  to  be 
humbugged/'  as  accurately  as  the  musical  farce,  the  cabaret  and 
the  jazz-band  strike  that  of  to-day.  For  each  of  these  was  a 
product  not  of  the  conscious  ethical  standards,  but  of  the  sub- 
conscious economic  conditions,  of  the  time. 

In  1850  American  literature,  art,  drama  and  music  were  still 
in  their  infancy,  and  formed  no  appreciable  part  of  the  life  of  the 
people.  Jenny  Lind  had  not  yet  sung  in  Castle  Garden.  Charles 
Dickens  had  then  been  known  but  a  dozen  years.  Fully  half  his 
host  of  world-loved  characters  were  yet  unborn.  "Harper's 
Magazine"  and  Godey's  "Lady's  Book,"  the  principal  magazines, 
were  then  prized  in  many  a  village-home  whence  have  come  men 
and  women  since  famous  in  American  history  and  literature; 
but  they  were  accessible  only  to  a  minority.  Public  libraries 
virtually  did  not  exist. 

Ideas  circulated  throughout  a  limited  world.  Wisconsin  and 
Iowa  were  our  western  Indian  frontiers.  Livingstone  had  not 
yet  explored  Africa,  nor  Commodore  Perry  awakened  slumber- 
ing, isolated  Japan. 

In  1850  Ohio  was  further  from  New  York  than  is  California 
to-day.  There  were  neither  sleeping  nor  parlor  cars,  and  very 
few  railroads  even  of  the  crude,  disjointed  sort  of  that  day,  on 
which  cars  must  be  changed  every  fifty  or  one  hundred  miles — 
usually  with  a  cheerful  irresponsibility  as  to  connections.  From 
Columbus  to  Cleveland,  Ohio,  even  as  late  as  1846,  when  the 
facts  reported  by  our  census  for  1850  were  in  process  of  forma- 
tion, one  still  had  to  travel  by  horse-drawn  coach,  jolting  over 
unspeakable  roads — often  built  "corduroy,"  of  unhewn  logs  laid 
crosswise  and  contiguous,  to  form  a  solid  surface  over  the  mire — 


RECENT   ECONOMIC   HISTORY  401 

the  passenger  sitting  upright  for  thirty-six  consecutive  hours! 
Emerson  in  that  decade  found  travel  so  exhausting  as  to  all  but 
prohibit  his  giving  lectures.  Travel  for  recreation  was  virtually 
an  innovation  with  the  Centennial  Exposition  of  1876. 

"Thrills"  were  few  and  far  between  in  1850.  Even  the  culti- 
vated usually  retired  before  nine,  for  lack  of  illumination 
adequate  for  reading.  The  modern  standard  evening  of  social 
enjoyment — at  the  clubs,  hotels  and  theaters  for  the  rich,  or  at 
the  "movies"  for  the  poor — must  await  the  coming  of  the 
electric  light.  The  six-hour  office-day  anfl  the  Saturday  half- 
holiday  were  still  a  half-century  deep  in  the  unknown  future. 
To-day's  summer-hotels  and  winter-resorts  crowded  with  adults 
seeking  any  possible  distraction  from  the  tedium  of  idleness,  its 
array  of  summer-camps  with  paid  entertainers  for  boys  and 
girls,  its  traditional  necessity  for  the  rich  of  a  trip  abroad,  or  to 
the  Pacific  Coast,  or  to  the  Florida  beaches  once  or  twice  each 
year,  and  of  daily  distraction  of  some  kind  for  all  except  the 
very  poor — were  all  unimaginable  to  the  plodding,  hard-working 
Americans  of  1850. 

Such  is  the  gigantic  contrast  between  the  social  life  of  seventy 
years  ago  and  that  to-day — the  contrast  in  outward  form  enforced 
by  that  inner  contrast  depicted  in  our  tables  of  statistics.  To 
assume  that  such  a  society  as  this  of  1850  was  thirty  per  cent 
less  industrious,  by  poll,  than  the  America  of  1910,  as  the  total 
enumeration  of  "gainfully  occupied"  would  apparently  indicate, 
would  reduce  this  entire  analysis  to  the  level  of  a  jest. 

The  people  of  1850  were  fully  as  industrious  as  now,  and 
probably  much  more  so.  The  total  number,  435,000  per  million, 
which  is  assumed  here  to  be  that  full  measure  of  industriously 
active  to  total  population  which,  at  least,  must  have  remained 
constantly  at  work  from  1850  until  1920,  will  probably  prove 
to  be  short  of  the  truth. 

Quantity  y.— The  only  other  mysterious  quantity  in  Table  29, 
that  called  y,  is  an  arbitrary  multiplier  which  expresses  the 
author's  rough  estimate  of  the  way  in  which  an  increasing  pro- 
portion of  the  mechanic  arts  has  been  diverted  from  productive 
lines,  as  the  decades  passed,  into  contributory  costs.  That  is 
to  say,  y  refers  to  industries  which,  so  far  as  the  classification 
of  Table  27  can  go,  must  appear  as  purely  productive.  Yet, 
because  their  output  is  being  increasingly  absorbed  to  main- 
tain commercial  warfare,  their  efforts  must  be  classed  as  con- 


402  MODERN   ECONOMIC   TENDENCIES 

tributary  to  commercial  dissipation  of  economic  energy.  This 
is  the  only  feature  of  our  statistical  estimate  which  is  treated 
in  this  off-hand  manner,  and  it  is  of  quite  secondary  im- 
portance. 

Thus,  the  last  sixty  years  have  shown  a  rapidly  increasing 
proportion  of  all  such  expensive  buildings  as  office-skyscrapers, 
retail  shops,  etc.,  which  are  directly  devoted  to  commercial  pur- 
poses. Then  there  are  others,  no  less  costly,  such  as  hotels, 
theaters,  clubs,  etc.,  which  are  distinctly  contributory  to  com- 
mercial dissipation,  although  not  directly  engaged. 

Then  in  each  such  building  machinery  plays  a  rapidly  in- 
creasing part.  The  sub-basements  of  modern  hotels  and  office- 
buildings  comprise  an  equipment  with  power,  for  elevators, 
electric  light,  steam-heat,  refrigeration,  vacuum-cleaning,  etc., 
which  far  exceeds,  in  power,  intricacy  and  cost,  that  of  the 
average  factory  or  transatlantic  liner  of  sixty  years  ago. 

Again,  in  addition  to  the  building-trades,  the  various  sorts 
of  mechanics  listed  under  c  are  contributory  to  every  one  of 
the  fields  of  commercial  activity  listed  in  Table  28.  Boiler- 
makers, machinists,  linemen,  etc.,  are  all  having  the  fruits  of 
their  labor  increasingly  wasted  by  diversion  into  commercial 
warfare.  The  field  of  transportation  and  communication  is 
most  prominent  in  this  respect;  but  there  is  no  sort  of  wage- 
earning  and  nominally  productive  occupation,  from  sand-hogs 
to  roofers,  from  plumbers  to  cabinet-makers,  which  is  not  to 
be  included.  It  is  this  broad  fact  which  is  given  conservative 
estimate  in  the  increasing  values  assigned  to  the  multiplier  y. 

With  most  of  the  classes  of  activity  except  these  mechanics 
the  name  of  the  occupation  itself  gives  clue  as  to  the  probable 
destination  of  the  product.  But  in  these  general  trades  we 
have  no  clue  in  themselves  as  to  what  this  multiplier  should 
be.  Yet  to  omit  it  altogether  would  be  deliberate  error. 

Relative  Growth  of  Technology  and  Commercialism. — The 
primary  aim  of  Tables  27  and  28,  as  stated,  is  to  bring  out 
the  basic  economic  contrast,  that  between  productive  and  com- 
mercial populations  respectively.  But  secondarily  these  tables, 
with  Table  29  as  a  crystallization  thereof,  are  designed  to  call 
attention  to  the  rate  of  growth  of  technical  activities,  as  con- 
trasted with  the  skilled  trades,  and  of  the  latter  as  compared 
with  the  simpler  trades  or  unskilled  labor. 

With  the  fact  that  these  first  mentioned  occupations  have 


RECENT   ECONOMIC   HISTORY  403 

grown  at  the  expense  of  unskilled  labor,  whether  in  the  factory 
or  on  the  farm,  the  public  is  already  familiar.  Indeed,  it  knows 
it  too  well.  That  is  to  say,  those  who  descant  most  loudly  upon 
our  national  evolution  have  been  laying  altogether  too  much 
stress  upon  this  technical  progress,  as  if  it  were  the  largest  and 
most  significant  indicator  of  the  age. 

Hence  the  reason  for  Table  29.  For  it  shows  that,  while 
there  has  indeed  occurred  this  phenomenal  growth  in  technical 
energies,  far  surpassing  that  of  any  previous  period  of  human 
history,  yet  that  of  commercialism  has  been  far  greater  still — 
indeed,  more  than  three  times  as  great! 

Later,  as  the  analysis  develops,  it  will  also  appear  that  this 
tremendous  expansion  of  commercialism  is  far  more  important, 
in  its  influence  upon  our  institutions,  our  beliefs  and  our  na- 
tional stability,  than  is  technical  progress.  Indeed,  our  recent 
economic  progress  cannot  be  understood  except  by  grasp  of 
the  broad  fact  that  it  is  our  growth  in  technique  which  has 
fed  our  growth  in  commercialism.  Learning  has  been  enslaved 
to  negotiation.  Commercialism  has  grown  into  the  dominant 
institution  of  modern  times  only  because  invention  has  recently 
provided  it  with  a  myriad  of  means  for  expansion  unparalleled 
in  past  history. 

Yet,  of  the  two,  commercialism  is  the  factor  embodying  its 
own  initiative  in  growth.  Invention  merely  permits  it  to  grow. 
Thus,  according  to  the  author's  estimate  (which  any  reader 
may  parallel  for  himself  as  he  pleases,  from  the  material  pro- 
vided by  Tables  27  and  28),  the  quantity  o  of  Table  29  gives 
the  best  measure  available  of  the  country's  growth  in  technical 
activities.  The  quantity  p  gives  the  parallel  growth  of  com- 
mercial activities.  Comparison  of  the  two  reveals  the  over- 
whelming  superiority  of  commercialism  over  technique,  as  the 
absorbent  of  our  national  energies  and  the  indicator  of  the  trend 
of  the  times. 

From  this  broad  lesson  to  be  learned  from  Tables  27  and  28 
let  us  turn  back  to  a  consideration  of  some  of  their  details. 
For,  lacking  explanation,  the  reader  may  quarrel  with  some 
detail  of  their  sub-classifications.  Yet  the  whole  plan  of  this 
statistical  analysis  has  been  to  provide  the  reader  with  full  data, 
and  then  defy  him  to  reach  any  conclusion  radically  different, 
in  effect,  from  the  author's. 


404 


MODERN    ECONOMIC   TENDENCIES 


TABLE 
VARIOUS  TOTALS:  PERSONNEL 


1850 


(x)  Excess  of  435,000  over  persons  enumerated  as  "Occupied" 


143,007 


(y)  Percentage  of  c  "  Mechanical "  assumed  to  be  diverted  from 
production  into  commercialism  by  employment  upon 
the  construction  of  commercial  buildings,  hotels  fre- 
quented by  commercialists,  and  other  tasks  accessory 
to  commercial  warfare 20 

(o)  "Arts,  Crafts  and  Sciences"  =c  plus  d  (excepting  "dray- 
men"), plus  e  (excepting  "clergymen"),  plus/ 34,605 

Percentage  of  increase  in  o  per  decade 

Percentage  of  increase  in  o  from  1850  to  1910 

(p)  "Total  Commercialism"',  Estimated  as  comprising  four- 
fifths  of  the  "Directly  Combative,"  plus  two-thirds 
of  "Munitions,"  plus  two-thirds  of  "Divertive,"  plus 
one-half  of  "Mercantile,"  plus  four-fifths  of  "Auto- 
mobiles," plus  one-half  of  the  remainder  of  "Trans- 
portation," plus  y  times  c  "Mechanical" 18,307 

Percentage  of  increase  in  p  per  decade 

Percentage  of  increase  in  p  from  1850  to  1910 

(q)  " Total  Production"  =435,000  minus  p 416,693 

Percentage  of  decrease  in  q  per  decade 

Percentage  of  decrease  in  q  from  1850  to  1910 


Productive  Occupations. — The  classification  of  occupations 
in  Table  27  is  virtually  self-explanatory.  One  fact  of  interest 
rather  than  of  importance  appears  under  "Professional"  occu- 
pations. This  is  that  the  proportion  of  clergymen  in  our  popu- 
lation has  remained  virtually  constant  throughout  the  sixty 
years,  varying  by  only  one  one-hundredth  of  one  per  cent! 
Likewise  that  of  physicians,  surgeons,  etc.,  has  varied  even  less 
— only  four  thousandths  of  one  per  cent!  Apparently  our  de- 


RECENT    ECONOMIC   HISTORY 


405 


29 

PER  MILLION  INHABITANTS 


1860 

1870 

1880 

1890 

1900 

1910 

118,063 

110,663 

88,238 

73,817  ' 

52,430 

20,013 

25 

30 

35 

40 

45 

50 

40,943 

46,627 

49,842 

63,211 

67,971 

93,359 

18.3 

13.9 

7.0 

26.8 

7.4 

37.3 









.... 

169.6 

23,916 

33,926 

44,283 

64,457 

80,690 

118,725 

30.6 

41.9 

30.5 

45.6 

25.2 

47.2 

.... 



.... 

548.5 

411,084 

401,074 

390,717 

380,543 

354,310 

316,275 

1.3 

2.4 

2.8 

2.6 

6.8 

10.7 









24.1 

mands  for  the  healing  of  spirit  and  body  respectively  have 
remained  constant  throughout  all  the  other  gigantic  changes  in 
society,  visible  and  invisible.  Indeed,  it  is  the  constancy  of 
such  features  as  this  in  the  tables  which  warrant  the  confidence 
that  where  the  tables  do  show  variations  of  appreciable  magni- 
tude they  record  actual  changes  in  the  general  trend  of  the 
community,  as  to  vocation  and  aim. 


406  MODERN   ECONOMIC   TENDENCIES 

Subconscious  Social  versus  Conscious  Individual  Forces.— 

These  facts  are  also  commended  to  those  who  see  frequent  signs 
of  a  current  decline  of  religion,  or  of  revolution  in  the  treat- 
ment of  the  sick,  or  any  other  change  originating  consciously 
with  the  individual.  Whatever  such  may  have  occurred,  they 
have  not  been  great  enough  to  record  even  a  tiny  ripple  upon 
the  surface  of  our  statistical  sea. 

The  great  forces  and  changes  of  modern  progress  are 
economic,  mechanical,  organizational  and  subconscious,  rather 
than  ethical,  individual,  psychological  or  conscious.  All  of  our 
conscious  ethics  are  but  the  product,  through  transformations 
more  intricate  than  those  of  the  technical  world,  of  our  sub- 
conscious acts.  The  people  of  one  age  or  another  do  not  all 
agree  simultaneously  to  wear  "tin  clothes,"  or  to  build  sky- 
scrapers, as  the  fashion  of  the  age,  just  from  whim;  but  be- 
cause some  inventive  mechanic,  quite  without  intending  it,  has 
created  conditions  such  that  no  other  form  of  life  than  that 
is  possible. 

Now  that  so  much  stress  is  being  laid  upon  the  subconscious 
in  the  individual  life,  why  cannot  we  have  the  subconscious 
properly  recognized  in  our  social  evolution? 

Competitive  or  Commercial  Occupations. — The  classification 
of  occupations  in  Table  28  needs  more  discussion.  Even  as  to 
Subclass  j  there  may  be  many  who  will  be  inclined  to  question 
the  propriety  of  regarding  all  these  occupations  as  useless  or 
destructive;  while  further  down  the  list  the  doubt  might  grow, 
from  the  viewpoint  of  the  man-in-the-street.  But  a  reference 
back  to  the  picture  of  the  imaginary  factory  permeated  with 
ownership-in-industry,  in  Chapter  VI,  will  show  that  all  these 
activities  are  connected  with  ownership  where  no  ownership 
needs  to  be  exercised,  and  that  therefore  they  are  waste. 

Nevertheless,  it  is  true  that  a  small  portion  of  the  activities 
of  Subclass  j  are  productive.  The  reason  for  apparently  over- 
looking this  fact  lies  in  the  countervailing  fact  that  small  por- 
tions of  all  the  activities  classified  as  entirely  productive,  in 
Subclasses  a  to  h  of  Table  21,  are  in  reality  commercially  com- 
bative. 

Thus  all  of  the  time  spent  by  working  or  professional  people 
in  seeking  jobs,  in  unemployment,  in  strikes  or  lockouts,  or  in 
seeking  to  buy  daily  supplies  at  the  best  possible  bargain,  must 
all  be  classed  as  combative,  duplicative,  wasteful  and  destructive 


RECENT   ECONOMIC   HISTORY  407 

of  energy.  The  amount  of  strength  lost  in  the  one  item  of 
daily  retail  shopping  is  inconceivable. 

As  to  womankind's  instinctive  pleasure  in  shopping,  there  is 
no  disposition  here  to  deny  its  wholesomeness,  up  to  a  certain 
degree.  This  degree  is  the  natural  pleasure  incidental  to  the 
selection  of  goods  in  the  only  natural  field  for  shopping,  namely, 
a  huge  bazaar  or  department-store  monopolizing  the  trade  of 
its  district  and  selling  the  same  goods  at  the  same  price  as 
every  other  store  in  the  district.  In  such  a  store  time  would  be 
spent  as  at  a  world's  fair,  solely  in  the  choice  of  commodities 
from  an  attractive  stock  representing  everything  available  any- 
where in  the  land,  and  in  true  education  at  the  hands  of  the 
disinterested  exhibitors — for  salesmen  in  the  modern  sense  they 
would  be  no  longer. 

In  shopping  of  that  sort  the  endlessly  wearisome  question: 
Where  to  buy?  would  have  disappeared.  Even  the  question: 
What  to  buy?  so  far  as  it  now  turns  upon  the  wisdom  of  one 
bargain  or  another,  would  be  gone.  For  every  article  offered 
for  sale,  under  such  a  system,  would  be  an  equal  bargain,  every- 
where in  the  land. 

The  sole  factor  in  selection  would  then  be  personal  taste. 
But  this  is  the  sole  pleasurable  feature  in  shopping  in  any 
event;  and  then  for  the  first  time  it  would  enjoy  free  play. 
The  rest  of  it  is  all  hard  work,  even  to-day;  and  then  that 
part  would  be  gone. 

Should  any  woman-reader  still  feel  disposed  to  defend  this 
her  ancient  prerogative  to  shop  wearily  from  store  to  store, 
trying  to  match  goods  or  to  better  a  price  by  a  hair,  let  her  not 
forget  that  her  daily  worries  at  home  over  securing  the  most 
economical  domestic  supplies  and  a  competent  servant,  and  the 
annoyance  and  delay  involved  in  finding  the  right  man  to  attend 
to  any  little  repair- job  about  the  house,  are  inseparable  parts 
of  this  same  prerogative,  her  feminine  heritage  of  commercial- 
ism, to  which  she  clings  not  wisely,  but  too  well. 

Again,  superintendents  have  been  classified  in  these  tables 
as  unqualifiedly  productive.  Yet  one  of  their  regular  duties 
is  the  hiring  of  labor;  and  it  is  commonly  accepted  that  the 
harassing  of  their  nerves  and  the  waste  of  their  time  in  ex- 
amining long  strings  of  applicants  for  each  little  job,  for 
which  the  bulk  of  the  applicants  prove  to  be  incompetent,  is 
one  of  their  heaviest  burdens. 


408  MODERN   ECONOMIC   TENDENCIES 

Another  instance,  apparently,  is  the  uniform  difficulty  of 
extracting  from  the  labor  available  the  quality  of  industry  ex- 
pected. Yet  to  whatever  extent  either  of  these  difficulties  may 
exist  they  are  wholly  due,  we  shall  see  in  later  chapters,  to  the 
presence  of  commercialism.  Briefly,  this  always  operates  to 
develop  a  deficit  of  demand  for  labor  below  supply.  Therefore 
labor,  due  to  the  mental  and  moral  malnutrition  due  to  its 
being  a  surplus,  is  always  undereducated,  in  proportion  to  what 
is  physiologically  and  naturally  possible. 

The  energy  dissipated  in  this  way  by  all  grades  of  superin- 
tendents, including  housewives  as  such,  should  be  classed  as 
commercial  in  our  statistical  contrast.  Yet  it  cannot  appear 
in  the  enumeration  except  as  an  estimated  counterbalance  against 
similarly  hidden  items  on  the  other  side. 

Or,  for  another  one  of  many  such  instances,  take  the  manu- 
facture of  furniture,  which  is  classed  in  Table  27,  as  a  wholly 
productive  occupation;  and  so,  in  general,  it  should  be.  Yet  a 
large  and  expensive  portion  of  the  furniture-business  is  now 
devoted  to  supplying  office-furniture,  and  this  is  used  almost 
entirely  for  the  purposes  of  commercial  warfare.  Much  of 
the  remainder  goes  to  furnish  or  decorate  hotels,  apartments, 
etc.,  which  exist  solely  at  the  behest  of  the  commercialists.  Our 
statistical  contrast  would  not  be  fair  to  itself  if  it  did  not  take 
cognizance  of  facts  such  as  these;  yet  they  cannot  appear 
statistically  except  in  the  form  of  paired  allowances. 

In  the  author's  estimate  of  total  commercialism  p,  in  Table 
29,  this  feature  of  the  furniture-trade  enters  through  the  multi- 
plier y;  but  in  the  contrast  between  Tables  27  and  28  it  finds 
no  expression.  Therefore  there  is  much  to  be  balanced  out 
before  these  primary  tables,  as  they  stand,  may  be  accepted  as 
accurately  illustrative.  Their  lacks,  however,  have  carefully 
been  kept  on  the  conservative  side. 

Crass  Inefficiency  Embodied  in  Modern  Mercantile 
Methods. — But  let  us  consider  some  of  the  items  classed  as 
purely  commercial  even  in  this  primary  classification.  Take  Sub- 
class le,  "mercantile,"  for  instance.  Apparently  all  mercantile 
pursuits  are  useful.  The  maintenance  of  stocks  must  be  an  in- 
evitable part  of  any  system.  Indeed,  when  we  have  exchanged  the 
present  commercial  system  for  a  nationally  organized  factory- 
system  much  better  stocks  than  now  will  be  maintained. 

But  their  maintenance  will  then  have  little  in  common  with 


RECENT  ECONOMIC   HISTORY  409 

mercantile  pursuits  of  to-day.  For  consider  the  planlessness 
and  duplication  of  the  present  system  (?)  of  a  myriad  of  little, 
irresponsible,  unconnected,  haphazard  stocks!  Go  shopping 
anywhere  and  observe  the  multiplication  of  little  stocks  in 
trade,  each  duplicating  all  the  others  in  ninety-odd  per  cent 
of  its  goods,  yet  none  of  them  offering  any  assurance  that  its 
stock  completely  represents  the  choice  available  from  the  sources 
of  supply.  Think  how  much  would  be  saved  in  money,  in  space 
and  in  the  Consumer's  time  if  the  entire  investment  in  store- 
goods  within  any  one  district,  whether  in  the  smaller  shops 
or  in  the  huge  department-stores,  were  to  be  centralized  in  a 
single  bazaar,  and  that  the  agency  for  every  factory  in  the  land. 

Walk  along  the  miles  upon  miles  of  petty  shops  in  every  large 
city.  Observe  the  pushcarts  and  the  curbstone  fakirs.  The 
cost  of  all  this  duplication  and  multiplication,  in  the  price  of 
the  goods  alone,  is  appalling  enough,  in  aggregate.  Yet  it  is 
as  nothing  compared  with  the  less  tangible  cost  to  the  Con- 
sumer in  his  lost  opportunity  to  enjoy  complete  arrays  of  goods 
in  a  single  display,  where  anything  produced  can  be  found 
without  loss  of  time  and  trouble,  in  standardized  grades  and  at 
a  uniform  price  throughout  the  land,  if  it  is  in  existence  at  all. 

Or  ride  on  an  elevated  train  through  any  warehouse-district, 
particularly  in  summer,  and  consider  the  warehouse  from  a 
superior,  factory-system  point  of  view.  Get  first  a  whiff  of 
coffee,  then  one  of  hides,  then  one  of  soap  and  then  one  of 
lumber,  and  then  observe  the  whole  list  repeated  each  block 
or  so. 

Observe  the  congestion  of  trucks  in  the  street  below,  each 
loading  some  microscopic  portion  of  these  many  duplicated 
stocks  into  the  least  efficient  of  all  known  means  of  transporta- 
tion (except  the  Chinese  plan  of  human  porterage) — horse- 
drawn,  iron-tired  wheels  over  cobble-stones.  Observe  the  labor 
of  carting  it  a  few  blocks  to  some  other  warehouse,  where  the 
job  of  unloading,  storing,  disgorging  and  re-carting  is  all  re- 
peated within  a  few  days,  without  the  slightest  gain  in  value 
of  the  goods  for  human  consumption. 

Why,  the  ants  have  a  society  superior  to  men  in  this  respect. 
For  they,  knowing  no  better  means  of  transportation  than 
porterage  by  muscular  force,  know  enough  not  to  duplicate 
this  effort  needlessly.  They  know  enough  to  have  a  single  ware- 
house for  the  entire  community. 


410  MODERN   ECONOMIC  TENDENCIES 

Ten  minutes  of  thoughtful  observation  of  any  city-street  in 
the  warehouse-district  will  justify  to  any  reader  the  author's 
placing  the  "teamsters"  among  the  commercial  and  wasteful 
occupations.  Let  any  such  a  reader  ask  himself,  as  a  common- 
sensible  man  of  affairs,  what  part  of  all  this  confusion  and 
congestion  would  remain  if  all  the  stocks  in  the  land,  as  well 
as  all  the  machinery  for  their  production  and  transportation, 
were  once  placed  under  the  control  of  a  single,  salaried,  national 
commissioner  or  superintendent. 

As  to  the  prompt  result  there  can  be  little  doubt.  Such  a 
commissioner  would  certainly  adopt  immediately  some  such 
principles  of  administration  as  these  following : 

(1)  No  duplication. — Each  community  or  district  allotted  a 
single  warehouse  for  each  line  of  goods,  where  now  we  have 
dozens,  scores  or  hundreds  of  little  inadequate  ones.    No  doubt 
as  to  where  anything  wanted  is  to  be  found. 

(2)  Directness  of  transit. — Warehouses  would  then  be   lo- 
cated on  the  line  of  physical  transit  from  producer  to  consumer. 
Now  they  are  located  near  the  centers  of  negotiation,  instead, 
nowhere  near  either  producer  or  consumer. 

(3)  Minimum  of  Transfers. — Goods  would  then  be  handled 
only  twice  or  thrice — once  from  the  producing  factory  or  the 
ocean-steamship  to  the  central  warehouse,  either  national,  state 
or  district,  and  again  from  there  to  the  local  wholesale  depot 
or  bazaar.     For  staple  commodities  going  to  outlying  points 
there  might  be  one  more  transfer,  from  district-bazaar  to  branch- 
store.    But  in  all  of  these  simple  and  direct  transfers  the  goods 
would  move  in  a  manner  strongly  contrasted  with  the  present 
method  in  three  features,  namely : 

(A)  They  would  move  in  much  larger  lots  than  now; 

(B)  They  would  move  at  an  almost  unvarying  rate; 

(C)  They  would  move  in  unre versed  directions. 

For  the  amounts  of  such  staples  as  coal,  soap,  standard 
weaves  of  cloth,  and  all  foods  except  the  most  perishable  of 
seasonable  fruits,  which  are  currently  consumed  by  any  com- 
munity are  practically  unvarying — except  as  they  are  now  arti- 
ficially fluctuated  by  varying  prices  manipulated  solely  for 
commercial  purposes.  In  response  to  this  steady  demand,  all 
staples  would  then  move,  under  the  factory-system,  in  a  steady, 
continuous  stream — in  direct  contrast  with  their  present  spas- 
modic leaps  alternating  with  fits  of  paralysis,  first  through  one 


RECENT  ECONOMIC   HISTORY  411 

middleman  and  then  through  another,  now  withheld  for  specu- 
lative purposes  and  then  released  in  excessive  volume.  Even 
the  seasonal  novelties  would  then  move  as  troops  are  moved  by 
a  general  officer,  instead  of  surging  like  an  unorganized  mob, 
as  they  do  now. 

The  result  of  the  adoption  of  these  obvious  principles  of 
factory-efficiency  would  be  these  following  startling,  but  wel- 
come, changes  in  the  aspect  of  our  daily  city-life: 

(a)  Warehouses  Eliminated  from   Cities. — The   warehouses 
would  then  naturally  be  located  at  railway-centers  or  at  contact- 
points  between  rail  and  water,  well  outside  the  cities.     Little 
labor  is  needed  for  warehousing  anyway,  and  under  the  factory- 
system  less  would  be  required;  with  that,  too,  settled  for  life. 
Under  the  present  commercial  plan  both  warehouses  and  fac- 
tories must  locate  within  the  cities,  not  only  in  order  to  be  near 
the  negotiative  centers,  but  because  their  demands  for  labor  fluc- 
tuate widely  and  continuously,  and  only  a  large  city  can  absorb 
these  fluctuations  in  demand  and  supply  of  labor.     But  under 
the  factory-system  there  could  be  no  objection  to  having  our 
principal  warehouses  as  remote  from  the  cities  as  powder-mills 
now  are.     Or  rather,  while  our  warehouses  might  remain  near 
where  they  are  now,  our  residential  districts  would  move  far 
away. 

(b)  Trucking  Eliminated  from  Cities  and  virtually  Abolished. 
— There  being  no  warehouses  in  town,  and  only  one  system  of 
delivery  of  what  retail  goods  must  be  transferred  through  city- 
streets  in  order  to  reach  the  Ultimate  Consumer,  trucks  would 
virtually  disappear  from  our  cities. 

Wholesale  purchases  would  of  course  be  unknown.  They  would 
then  be  replaced  by  mechanical,  automatic,  requisitions  passing 
between  one  department  of  the  national  factory-system  and 
another,  without  debate  as  to  price. 

(c)  City-streets  and  Water-fronts  may  be  smoothly  Paved  and 
Beautified. — There  is  no  natural  reason  whatever  why  our  water- 
fronts should  be  the  ugliest  features  of  our  cities,  as  now.    They 
are  the  first  portions  to  greet  the  eye  of  the  stranger.     They 
should  be  dignified  and  beautiful,  and  under  the  factory-system 
they  would  be  so. 

(d)  Railway-terminal  Problems  much  Simplified. — Freight- 
terminals  would  no  longer  be  in  the  cities  at  all,  but  at  the 
remote  warehouses.     No  commodities  would  enter  any  city — 


412  MODERN   ECONOMIC  TENDENCIES 

even  a  great  seaport  like  New  York — except  those  needed  for 
actual  consumption  by  its  inhabitants.  Transatlantic  freight 
would  be  landed  on  the  shores  of  Newark  Bay  or  Jamaica  Bay, 
and  would  stay  there,  in  huge  warehouses,  until  wanted  in 
Peoria  or  Oklahoma.  Why  stuff  which  is  actually  en  route  from 
Marseilles  to  Butte,  Montana,  should  ever  pass  through  the 
streets  of  Manhattan,  as  now,  is  quite  beyond  the  comprehension 
of  any  sensible  person  of  affairs. 

(e)  Our  Cities  would  naturally  become  parked  Exposition- 
grounds. — Large,  beautiful  buildings,  of  an  architectural  design 
emanating  from  the  best  talent  of  the  country,  and  co-ordinated 
for  the  whole,  would  then  be  scattered  over  Manhattan  Island, 
separated  everywhere  by  grass  and  trees.  Each  would  be  a  huge 
exposition  of  all  to  be  had  in  America  in  its  particular  line, 
combined  with  the  function  of  a  bazaar  for  making  retail  pur- 
chases. 

(/)  Congestion  would  disappear. — The  waste  places  in  the 
country  would  be  populated  with  those  now  crowded  unnaturally 
into  the  cities.  The  natural  population  of  the  entire  metro- 
politan district  surrounding  New  York  Bay,  for  instance,  should 
not  be  over  one  million,  for  any  national  population  not  exceed- 
ing two  hundred  millions.  And  when  the  unneeded  five  mil- 
lions departed  for  the  country  they  would  take  the  theatres, 
opera,  concerts,  universities,  etc.,  along  with  them.  Both  coun- 
try and  city  would  become  parks. 

A  Factory-system  Metropolis. — New  York  must  then  be,  as 
now,  the  main  emporium  of  purchase,  the  chief  center  of  interest 
in  art,  science,  religion  and  administration — the  mecca  of  people 
from  Santa  Fe  and  Vancouver  who  wish  to  shop  and  see  and 
hear.  But  that  is  all  it  would  be,  of  what  it  is  now.  The  bulk 
of  its  present  sordid  occupations  would  have  ceased  to  exist.  The 
bulk  of  its  present  inhabitants  would  be  scattered  throughout  a 
myriad  of  country-homes,  where  their  work  and  pay  would  then 
draw  them.  No  one  would  be  in  New  York  for  purposes  of 
"business,"  because  there  would  then  be  no  business;  nor  to 
seek  occupation,  because  employment  would  everywhere  be  con- 
tinuous. But  in  promising  all  that  we  are  getting  ahead  of  our 
argument. 

Without  stopping  here  to  unleash  the  imagination  unduly 
regarding  the  wonderful  changes  which  must  come  over  our 
civilization  when  once  the  organization  of  its  industry  is  taken 


RECENT   ECONOMIC   HISTORY  413 

up  as  a  unified  national  problem — for  defter  pens  than  this  have 
already  depicted  these  visions — only  enough  should  be  said  here 
to  justify  the  skeleton-classification  of  occupations  which  is  pre- 
sented in  Tables  27  and  28.  What  has  just  been  said  as  to  the 
metamorphosis  of  merely  this  one  item  of  industry  and  com- 
merce— the  maintenance  of  stocks — by  the  step  from  the  present 
commercial  to  a  national  factory-system,  must  stand  as  a 
reminder  that  one  must  stop  and  imagine  skillfully  and  ener- 
getically before  denying  the  correctness  of  assigning  to  com- 
mercial classes  many  an  occupation  which  at  first  blush  does  not 
seem  to  be  such. 

Sub-class  m,  "Divertive." — Thus,  take  for  instance  the  gen- 
eral Sub-class  ra,  the  activities  and  commodities  of  which  cover 
a  large  portion  of  familiar  life  which  at  first  sight  seems  most 
remotely  connected,  if  at  all,  with  commercial  combat.  Take  in 
particular  the  occupation  of  "launderers  and  laundresses/'  Here 
is  an  old-fashioned,  laborious  occupation  which  might  be  thought 
the  last  to  be  classed  with  commercial  militarism,  as  unpro- 
ductive. Surely  cleanliness,  as  next  to  godliness,  is  a  prime 
requisite  for  wholesome  human  life. 

And  so  it  is.  And  truly,  also,  laundry-work  was  originally 
connected  solely  with  cleanliness — or  so  it  was  in  America  in 
1850,  at  least.  But  what  is  its  true  aspect  to-day? 

It  will  be  noticed  that  this  occupation  has  expanded  at  a 
tremendous  rate,  multiplying  its  proportion  per  capita  of  pop- 
ulation some  six  or  seven  fold  in  the  sixty  years.  Does  this 
unquestionable  fact  mean  that  we  are  now  six  or  seven  times  as 
clean  as  we  were  in  1850  ?  Or  does  it  mean  that,  for  some  reason 
or  other,  it  requires  six  or  seven  times  the  amount  of  effort  to 
remove  our  natural  accumulations  of  dirt  per  capita  that  it  did 
in  1850? 

Surely,  with  the  well  known  advent  of  steam-laundry-machin- 
ery, now  used  all  but  universally,  this  cannot  be  the  explanation. 
Nor  can  it  be  that  modern  vocations  are  dirtier  than  the  agri- 
culture, fishing,  etc.,  of  1850,  and  that  this  explains  the  increase ; 
for  we  know  well  that,  even  if  the  modern  greasy  mechanic  is 
dirtier  than  his  grandfather  at  the  plow,  it  is  not  the  greasy 
mechanic  who  supports  all  these  laundries.  We  were  neither 
dirty  enough  then,  nor  clean  enough  now,  to  explain  the  statistics 
phvpiolocrically.  They  must  have  an  economic  significance. 

The  data  no  doubt  display  in  part  the  transition  of  female 


414  MODERN   ECONOMIC   TENDENCIES 

labor  from  house  to  factory.  Laundry-work,  as  originally  done 
in  the  home,  went  unenumerated.  Thus  this  apparent  growth  in 
laundresses  consists  in  part  of  the  Quantity  x  already  discussed. 

Economics  and  Aesthetics. — But  this  cannot  explain  all. 
There  has  been  too  obviously  an  increase  in  the  importance  of 
fresh  linen  in  social  life,  as  the  decades  have  passed.  Thejact 
is  that  the  modern  occupation  of  clothes-washing  has  left  a  long 
ways  behind  it  any  mere  question  of  cleanliness.  The  bulk  of 
all  this  modern  so-called  cleanliness  spells  display — competitive 
personal  display.  The  heart  of  the  market-system  is  display. 
Sales  are  effected,  profits  made,  jobs  secured,  enterprises  pro- 
moted and  husbands  acquired  not  by  what  a  thing  really  is,  but 
by  what  it  can  be  made  to  appear  to  be. 

Since  the  days  of  Eoman  law  the  motto  of  commercialism  has 
been  caveat  emptor:  Let  the  buyer  look  out  for  himself!  All 
commercial  incomes  are  made  by  skillful  pretense,  by  half-truths 
or  by  "bluff" — not  necessarily  by  actual,  positive  deceit,  but  by 
letting  the  other  fellow  infer  from  appearances  something  much 
more  advantageous  to  himself  than  the  seller  knows  to  be  the 
truth. 

Therefore  the  individuals  into  whose  hands  fall  the  biggest 
prizes  of  commercial  militarism  must  necessarily  be  those  who 
are  instinctively  fond  of  display  and  self-assertion.  This  fact 
stands  out  at  every  protuberance  of  the  advertising,  drumming, 
promoting,  egotistical  market-system.  Its  agents  are  always  well 
dressed.  The  diamonds  of  the  drummer  have  become  proverbial. 

When  one  rises  in  the  scale  of  commercialism  to  the  higher 
levels,  to  the  larger  manipulators  in  the  business-world,  educa- 
tion and  taste  often  prove  capable  of  overlaying  this  tendency 
with  a  carefully  cultivated  modesty  of  manner,  so  that  it  is  no 
longer  crudely  prominent.  But  it  is  there,  just  the  same,  under- 
neath, like  the  armor  of  a  cloaked  medieval  knight.  Once  show 
yourself  to  be  a  powerful  adversary,  rather  than  a  social  comrade, 
and  you  will  see  it  revealed  instantly. 

All  such  types  of  men  will  patronize  only  women  who  are  also 
instinctively  skillful  at  display — with  better  or  worse  taste,  like 
their  male  companions,  but  none  the  less  display — and  thus  such 
women  and  their  fashions  have  naturally  survived  over  more 
modest  ones,  as  the  standards  for  all  women.  Then  the  universal 
presence  in  commercial  circles  of  relatively  large  unearned,  or 
easily  earned,  incomes  adds  oil  to  the  fire.  Competitive  display 


RECENT  ECONOMIC  HISTORY  415 

thus  becomes  so  universally  the  foundation  of  social  life  that  its 
devotees  often  forget  that  they  are  engaged  in  it. 

This  policy  is  both  the  source  and  the  fruit  of  large  incomes. 
Its  intensity  accelerates  accumulatively.  It  determines  the  idols 
in  high  places  which  the  masses  are  called  upon  to  worship. 
Then  all  the  smaller  commercial  fry  must  inevitably  copy,  and 
very  soon  the  pleasant  and  profitable  policy  of  personal  display 
has  become  at  once  an  art,  a  national  mania,  a  big  business  and 
an  unconscious  tradition  of  the  times. 

Thus,  as  commercialism  grows  upon  us  through  the  innocent 
hand  of  invention,  modesty  in  dress  and  demeanor  must  in- 
evitably retire  gradually  from  our  civilization,  because  unprofit- 
able— or,  in  extreme  cases,  even  fatal.  It  will  do  this  with  as 
little  regard  to  the  restraint  of  moral  compunctions,  and  with  as 
little  need  for  explanation  in  terms  of  "original  sin"  or  "per- 
versity of  human  nature" — those  idea-proof  retreats  of  the 
intellectually  lazy  or  the  mentally  timid — as  in  the  case  of  ship- 
wrecked unfortunates  who,  after  two  weeks  in  an  open  boat,  turn 
to  cannibalism  as  the  only  alternative  to  starvation.  In  a  com- 
mercialistic  civilization  fashions  necessarily  run  riot.  Usually 
merely  vain,  they  must  gradually  become  sheerly  immodest.  By 
the  relentless  law  of  the  survival  of  the  fittest,  the  modest  must 
follow  the  pace  of  the  immodest,  or  else  drop  out  of  the  race. 
And  the  remedy  is  not  to  be  found  in  more  modesty,  but  in  more 
horse-sense  in  our  economics.2 

2The  New  York  Times  for  July  26,  1914,  quotes  an  English  "financier 
whose  name  is  known  in  every  country"  as  saying: 

"It  has  been  a  season  of  dementia.  The  people  are  going  mad. 
Look  how  nations  and  private  persons  alike  are  spending  money 
above  their  earnings.  Look  at  the  women,  dressing,  or  undressing, 
in  a  fashion  that  makes  every  right-minded  man  blush  for  them! 
Look  at  the  Futurist  craze  in  paintings!  Look  at  the  rage  for  the 
Eussian  ballet,  which  is  purely  sensual  satisfaction!  The  suf- 
fragettes are  not  any  madder  than  the  rest  of  the  women  of  London." 

And  Philip  Gibbs,  the  novelist,  as  saying  in  the  same  issue: 

"What  is  happening  to  the  spirit  of  the  English  people,  which 
is  leading  to  so  many  strange  adventures  in  feminine  audacity  and 
hastening  the  pace  of  the  social  whirligig  so  in  the  rush  for  pleasure! 
Men  and  women  are  losing  all  restraint.  Is  it  only  a  passing  phase, 
or  is  the  end  of  this  year's  season  the  beginning  of  a  greater  end, 
involving  the  decadence  of  the  English  people? 

"It  has  been  a  season  of  sensation.     Never  within  living  memory 


416  MODERN   ECONOMIC  TENDENCIES 

We  must  not  digress  here  from  our  immediate  business, 
economics,  to  develop  properly  the  ethics  of  this  situation.  It  is 
enough  to  note  that  it  was  simultaneously  with  the  twentieth- 
century  acceleration  of  commercialism  immediately  after  the 
Spanish  War,  just  when  arose  that  great  outburst  of  inflation 
of  capitalism  which  aroused  the  protest  of  even  Russell  Sage, 
that  first  became  prominent  that  accentuation  in  the  fashion  for 
display  in  dress  which  is  still  in  progress.  It  was  no  mere 
coincidence,  and  still  less  a  whim,  that  just  when  America's  first 
hundred-million-dollar  corporation  was  being  formed,  it  first 
became  customary  for  women  to  wear  white  waists  in  winter. 
Up  to  that  time  white  had  been  worn  only  in  midsummer,  and 
sparingly  even  then;  it  soiled  too  easily;  and  it  was  long  after 
the  white  waist  appeared  before  the  fashion  for  white  extended 
further.  But  to-day,  only  twenty  years  later,  it  seems  inconceiv- 
able that  it  could  have  been  so,  so  freely  do  women  now  wear 
white  from  head  to  toe,  in  the  most  informal  places  and  the 
most  inappropriate  seasons. 

While  modern  standards  of  taste  have  prevented,  as  yet,  any 
revival  of  extremes  in  fashion  as  ugly  as  those  of  England  under 
Elizabeth,  or  of  France  under  Louis  XV — both  of  which  took 
their  origin  in  an  expansion  of  commercialism  parallel  with  that 
now  prevailing  in  America — yet  all  recent  tendencies  have  been 
in  that  direction.  We  are  copying,  rather,  from  the  Greeks  the 
beautiful  road  to  velvet  vice. 

One  of  the  few  measures  of  the  growth  of  this  tendency  which 
submits  itself  to  statistical  estimate  is  the  way  womankind  has 
recently  learned  to  disregard  laundry-expense.  She  has  com- 
pletely forgotten  the  days  of  her  grandmother,  when  each  woman 

has  the  town  been  so  given  up  to  gayety.  Never  in  that  time  have 
its  entertainments  been  so  deliberately  audacious  in  luxury  and  liberty. 
...  It  was  the  women  who  set  the  pace.  At  the  very  beginning 
of  the  season  it  was  obvious  that  they  were  out  for  sensation,  for 
audacity,  for  laughing  defiance  of  old  conventions,  for  a  splendid 
time  at  all  costs. ' ' 

This  was  printed  at  the  acme  of  the  worst  depression  of  securities, 
in  a  ' '  silent ' '  crisis,  which  had  been  known  in  twenty  years.  It  appeared 
just  a  week  before  all  Europe  was  overwhelmed  by  an  unexpected  war, 
soon  to  involve  over  thirty  nations!  Was  it  so  unnatural  that  Germany 
should  go  mad  with  militarism  at  a  time  when  London  and  New  York 
were  going  mad  with  other  aspects  of  commercialism? 


RECENT   ECONOMIC   HISTORY  417 

had  to  do  her  own  laundry-work  by  hand,  with  water  carried 
from  pump  or  distant  spring. 

Moreover,  it  is  particularly  to  be  noted  that  this  unenumerated 
growth  in  number  of  laundry-workers  per  capita,  which  is  mar- 
velous for  a  simple  old-fashioned  industry  like  clothes-washing, 
records  merely  the  growth  of  the  personnel  thereof.  It  gives  no 
adequate  measure  of  growth  in  volume  of  output.  For  this  we 
have  no  statistics.  But  during  the  sixty  years  the  physical 
effectiveness  of  each  working-person  in  collecting,  washing,  iron- 
ing and  returning  laundry-work  has  been  so  wonderfully 
multiplied  by  steam-machinery,  automobiles,  etc.,  that  the 
volume  of  work  turned  out  by  this  seven-  or  eight-fold  personnel 
is  probably  twenty  times  that  of  1850,  per  capita  of  total  popula- 
tion. 

And  since  this  average  per  citizen  must  include  every  newsboy 
or  slum-baby  as  of  equal  weight  with  any  fop  or  lady  of  the 
avenue,  what  must  be  the  ratio  of  increase  in  expense  for  laun- 
dry-work, measured  not  in  dollars,  but  in  material  realities,  for 
the  well  dressed  class  alone!  Even  in  the  poorer  quarters  it  is 
marvelous  how  mothers  and  babies  appear  in  fresh  white  each 
afternoon  at  five. 

It  is  of  course  not  argued  here  that  all  this  laundry-work 
constitutes  an  unmodified  loss  to  the  community,  nor  that  fresh 
clothing  is  not  just  as  legitimate  a  source  of  joy,  health  and 
self-respect  as  food  and  lodging.  But  just  as  this  analysis  is 
seeking  to  show  that  a  large  and  increasing  portion  of  all  food 
and  lodging  is  being  diverted,  by  the  indirect  influence  of  com- 
mercialism, away  from  its  normal  function  in  the  support  of 
natural,  unself-conscious  life,  into  competitive  display  in  the 
cultivation  of  a  false  pride,  so  the  same  is  argued  as  more 
obviously  true  of  laundry- work. 

Since  no  figures  at  all  have  been  entered  into  the  commercial 
half  of  this  classification  to  represent  this  undoubted  diversion 
of  food  and  lodging,  nor  even  of  manufactured  clothing,  dress- 
making, upholstery,  etc.,  all  of  which  have  been  classified  as 
unqualifiedly  productive  of  wholesome  life,  criticism  cannot  be 
aroused  by  our  classification  of  all  laundry-work  as  merely  in- 
cidental to  commercialism,  to  counterbalance. 

The  Opera  under  Commercialism,— For  another  instance  of 
the  many  indirect  ways  in  which  commercialism  robs  our  civi- 
lization, takes  the  highest  form  of  musical  and  dramatic  art 


418  MODERN   ECONOMIC   TENDENCIES 

known  to  American  culture,  the  Metropolitan  Opera,  in  New 
York.  What  is  the  true  economic  aspect  of  this  institution? 

Here  we  have,  possibly  with  the  exception  of  some  "movie" 
stars,  the  most  expensive  set  of  entertainers  known  to  history. 
For  the  principal  singers  the  fees  are  rumored  to  range  from  five 
to  twenty-five  hundred  dollars  per  night. 

Why  is  this?  Is  this  an  instance  of  balance  between  supply 
and  demand  ?  Is  this,  as  with  the  movie  stars,  a  satisfaction  of 
an  enormous  public  want? 

Not  in  any  proper  sense.  These  huge  fees  do  not  represent 
true  economic  demand.  This  is  proven  by  two  significant  facts. 
First,  the  great  mass  of  music-loving  public  is  virtually  excluded. 
The  number  of  seats  open  to  the  public  is  so  small,  and  their 
location  so  poor,  that  popular  support  must  be  dropped  from 
consideration  at  the  start. 

Secondly,  the  opera,  we  are  told,  has  not  ordinarily  paid 
expenses.  It  certainly  has  never  been  a  money-making  enterprise, 
in  parallel  with  other  lines  of  investment.  The  opera  is  main- 
tained primarily  by  a  few  wealthy  box-holders  and  private  sub- 
scribers, as  a  symbol  of  exclusiveness  enjoyed  by  an  aristocracy  of 
commercialism  so  tawdry  at  heart  that  its  display  of  dress  and 
personalities  was  for  years  the  subject  of  public  ridicule. 

The  vast  tide  of  enormous  incomes,  either  unearned  in  any 
way  or  else  fought  for,  which  concentrates  itself  into  a  pecuniary 
maelstrom  in  New  York  City  demands  some  form  of  diversion 
which,  in  a  land  devoted  to  democratic  ideals,  the  ordinary 
person  cannot  enter.  This  can  be  accomplished  only  by  making 
it  so  costly  that  the  ordinary  person  can  afford  it  only  occasion- 
ally, and  the  poor  not  at  all.  Indeed,  the  opera  in  its  social 
sense  cannot  be  entered  at  all  except  by  the  wealthy  subscriber. 

That  is  the  soul  of  this  whole  enterprise.  Some  of  its  sub- 
scribers are  persons  of  taste  more  modest  than  that  mentioned; 
but  the  average  is  as  stated. 

To  try  to  accomplish  this  end  upon  a  plan  which  made  big 
money  by  merely  charging  high,  exclusive  prices,  while  keeping 
costs  within  reasonable  limits,  would  be  impracticable.  For  then 
it  might  be  paralleled  by  a  competing  opera  content  with  smaller 
profits ;  and  that  the  public  could  afford.  No,  the  only  way  is  to 
establish  arbitrarily  such  exaggerated  standards  of  pay  for 
singers,  and  of  costliness  of  everything  expected  of  an  opera- 
singer,  resulting  in  such  high  admission-prices  aad  such  low 


RECENT   ECONOMIC   HISTORY  419 

profits,  that  no  other  musical  caterer  can  compete.  Repeated 
failures  of  attempts  to  do  this  have  proven  the  truth  of  this 
statement. 

This  policy  is  reinforced  by  the  character  of  the  demand. 
While  the  subscribers  include  a  few  music-lovers  of  the  highest 
culture,  yet  the  average  of  those  able  to  subscribe  represents  the 
typical  psychology  of  him  who  can  succeed  at  commercial  combat 
— loving  display  rather  than  delicacy,  whether  in  music,  in  the 
theater  or  in  ladies'  dress.  These  standards  of  taste  are  such 
that  the  opera  has  always  been  a  performance  of  stars,  who 
combine  with  musical  talent  the  element  of  advertising,  rather 
than  a  well  rounded  ensemble  of  instruments,  chorus  and  solos. 
No  schooled  lover  of  music  would  admit  that,  among  the  singers, 
it  is  the  highest  artists  who  receive  the  highest  fees.  It  is  those 
most  spectacular  in  color,  though  still  in  the  realms  of  higher 
musical  art. 

In  general,  the  music  is  excellent.  Criticism  from  any 
authoritative  source  would  be  intolerable,  if  aroused.  These 
people  wish  to  prove  to  the  world  that  they  can  afford  the  best 
music,  quite  as  that  they  can  afford  the  most  spacious  estates. 
But  this  same  grade  of  music,  or  even  better,  might  be  had  for 
a  fraction  of  the  price,  as  formerly  in  Germany,  if  it  were  not 
for  this  peculiar  demand  for  high  prices,  which  commercialism 
has  bred  in  America  beyond  its  point  in  any  other  commercial 
land. 

Reversal  of  the  Natural  Law  of  Price  and  Demand. — For 
in  all  lines  of  supply,  as  well  as  in  music,  there  exists  always  a 
market  which  caters  to  the  rich.  In  this  market  high  prices  are 
an  inducement  to  trade.  A  low-priced  article  cannot  be  sold, 
whatever  its  excellence.  This  is  obviously  true,  for  instance,  of 
some  lines  of  automobile-accessories. 

So  the  opera  is  charged  up  in  our  statistical  tables  as  accessory 
to  the  waste  due  to  commercialism — not  because  opera  is  un- 
desirable, but  because  the  inspirational  aid  of  this  one  is  wasted 
upon  those  who  do  not  give  back  to  society  its  value.  Under  a 
national  factory-system  grand  opera  would  be  produced  in 
twenty  or  an  hundred  cities,  at  prices  accessible  to  virtually  all. 
Then  it  would  be  a  great  aid  in  the  enjoyment  of  productive 
life.  To-day  it  serves  merely  as  an  intensifier  of  commercial 
militarism. 


420  MODERN   ECONOMIC   TENDENCIES 

Aesthetic  Decadence  through  Commercialism. — It  is  in  this 
general  sense  that  all  of  the  activities  listed  under  Class  m  are 
properly  to  be  regarded  as  allied  to  commercialism,  and  as  a 
part  of  the  true  measure  of  its  growth.  In  all  or  part  they  either 
never  would  exist,  under  a  rational  economic  system,  or  else  they 
would  be  so  transformed  as  to  be  unrecognizable. 

Male  readers  may  be  slow  to  appreciate  the  place  of  tobacco  in 
such  a  list,  and  female  readers  confections.  Indeed,  it  is  only  in 
so  far  as  they  are  now  exaggerations  or  distortions  that  they 
belong  there.  But  a  sure  accompaniment  of  this  rising  fashion 
of  combat  over  commercial  booty  has  been  an  exaggeration  and 
deformation  of  our  tastes  in  dress,  diversion,  food  and  stimula- 
tion, into  rag-time,  cabaret  and  Coney  Island  standards.  Of 
this  the  treatment  of  cigarettes  by  our  young  men  as  if  they  were 
the  breath  of  life,  not  to  be  dispensed  with  at  any  time  or  place, 
and  the  consumption  of  sundaes  and  cocktails  by  our  young 
women  at  all  hours  of  the  day,  is  a  significant  feature.3 

It  must  not  be  inferred  from  the  above  that  all  of  the  activities 
and  commodities  included  in  Class  m  are  to  be  regarded  as  value- 
less. The  author  would  not  be  misunderstood  as  advocating  the 
abolition  of  all  art,  music  and  drama,  nor  even  "white  light  and 
lobster."  What  is  urged  here  is  merely  what  sober,  cultivated 
opinion  will  second  everywhere,  namely  that  the  bulk  of  all  art, 
music,  drama,  literature  and  illumination  is  now  being  prosti- 
tuted into  a  slavery  to  advertising-purposes  which  resulh 
inevitably  in  the  most  tawdry  standards  of  taste. 

The  absorption  of  much  of  our  best  delineative  art  and  untold 
cost  of  press-work  in  the  production  of  monkey-like  fashion- 
plates,  gaudy  calendars,  silly  street-car  posters,  hideous  "comic 
supplements"  or  flashy  covers  for  cheap  magazines,  which  exist 
solely  for  and  upon  advertising;  the  devotion  of  most  of  the 
money  available  for  music  to  rag-time  or  cabaret  favorites;  the 
decay  of  literature  visible  in  the  "best  sellers" ;  the  degeneration 
of  the  stage,  first  from  the  legitimate  drama  to  burlesque  or 
musical  farce,  and  then  from  that  to  vaudeville  or  "movies" ;  the 
guidance  of  our  grand-opera  along  the  ethics  of  the  race-track 

sin  a  day  when  it  is  difficult  or  impossible  to  secure  enough  sugar 
for  ordinary  domestic  uses  in  kitchen  and  dining-room,  not  to  mention 
the  preserving  of  fruit,  etc.,  the  fact  that  every  city-block  displays  a 
ton  of  candy,  at  exorbitant  prices,  is  certainly  a  sign  of  social  develop- 
ment along  lines  which  cannot  be  characterized  as  wholesome. 


RECENT  ECONOMIC   HISTORY 


421 


rather  than  of  true  art;  and  finally  the  devotion  of  untold  kilo- 
watts of  good  electricity  and  ingenuity  to  the  production  of  the 
most  bizzare  effects  in  colored  lights,  for  electric  signs,  theater- 
entrances  or  anywhere  else  where  money  can  be  picked  up  by 
creating  a  cheap  sensation — all  these  are  instances  of  a  gigantic 
and  shameful  waste  of  the  highest  possibilities  for  art  now  latent 
within  our  civilization.4 

4  The  growth  of  electric  central  power-stations  in  the  United  States 
from  1902  to  1912,  as  reported  by  the  Census  Bureau,  is  given  below  in 
Table  30,  reduced  to  proportions  with  the  varying  population.  While, 
of  course,  a  large  part  of  all  this  power  is  used  productively,  some  of  it 
for  industrial  motors  and  some  for  light  for  useful  purposes,  yet  it  is 
unquestionable,  from  our  general  observation,  that  the  major  portion  is 
absorbed  in  the  maintenance  of  those  electric  signs  and  commercial 
displays  of  light  which  have  sprung  up  most  markedly  during  the  last 
two  decades. 

TABLE  30 

ELECTRIC  CENTRAL  STATIONS,  1902  TO  1912 


Quantities  per  Population 

Percentage  of 
Growth  during 
Preceding  Five- 
year  Period 

1902 

1907 

1912 

1907 

1912 

Number  of  Stations  per 
million  of  population  .  . 
Persons  per  ten  million 
inhabitants  

41.7 
38.6 
20.2 
27.2 

50.0 
48.9 
42.3 
61.9 

50.8 
78.3 
71.1 
97.0 

20 
26 
110 
127 

2 
60 
66 
59 

Horsepower  per  thousand 
inhabitant 

Output  Kw.-hours  per  in- 
habitant    

In  reference  to  the  apparent  decline  in  rate  of  growth,  during  the 
second  five-year  period,  it  should  be  noted  that  the  first  of  these  periods 
included  one  of  the  most  phenomenal  times  of  commercial  prosperity 
and  expansion  which  this  country  has  ever  known,  while  the  second 
included  one  of  its  worst  panics.  It  is  remarkable  that  in  spite  of  this 
fact,  the  second  period  should  exhibit  any  growth  at  all.  The  fact  that 
it  actually  witnessed  a  growth  of  some  sixty  per  cent  in  the  personnel 
employed  and  the  current  put  out,  per  inhabitant,  is  more  than  remark- 
able. 


422  MODERN   ECONOMIC   TENDENCIES 

They  are  due  solely  to  the  prevalence  of  commercialism,  rather 
than  to  any  spontaneous  degeneration  of  public  taste.  In  all  of 
this  the  selective  preferences  of  the  public  have  little  or  nothing 
to  do  with  the  result.  Does  anyone  suppose  that  we  have  over- 
crowded cars,  or  silly  advertisements  obtruded  upon  our  un- 
willing attention,  or  tips  in  restaurants,  or  wildly  fluctuating 
stocks,  or  bankruptcies,  or  slums,  because  the  majority  of  us  like 
those  things? 

Not  at  all.  Not  even  a  worthy  minority  wants  them.  None 
of  them  are  expressions  of  free  human  choice.  None  of  them  are 
under  "social  control/'  They  exist  merely  because,  under  the 
commercial  system  which  virtually  all  uphold,  they  are  indirectly 
of  pecuniary  profit  to  the  few  who  do  not  use  them ;  and  because 
they  are  the  best,  under  that  limitation,  which  we  who  do  use 
them  can  get. 

Automatic  Involtmtariness  again. — Standards  of  taste  are 
the  social  effects,  and  not  the  causes,  of  our  economic  institutions. 
They,  just  as  much  as  any  other  feature  of  life,  are  determined 
by  the  survival  of  the  fittest  to  the  environment;  and  commer- 
cialism is  not  an  environment  selective  of  high  artistic  aims. 

Commercialized  Art. — If  art  must  be  bought  and  sold  in  the 
market  at  auction,  as  a  handmaiden  to  commercial  profits,  then 
certainly  that  which  permits  the  largest  margin  between  original 
cost  and  apparent  worth  will  make  the  greatest  profits,  and  thus 
will  survive  at  the  expense  of  better  art  which  malces  less  show. 
But  there  is  no  better  definition  of  "tawdry"  than  that  which 
embodies  the  most  pretense  upon  the  cheapest  possible  base.  Yet 
that  is  exactly  what  commercialism  is  selecting  automatically  for 
thrusting  upon  us  in  every  walk  in  life — on  the  stage,  in  liter- 
ature, in  women's  dress  and  complexion,  in  our  restaurants  and 
in  the  amenities  of  the  overcrowded  street-car — because  it  leaves 
the  largest  margin  above  costs  for  profits! 

Just  as,  in  every  field  of  economics,  commercialism  is  cutting 
down  the  quantity  and  quality  of  commodity  and  service  to  the 
lowest  which  the  "traffic"  will  bear — meaning  the  lowest  which 
the  profits  will  bear — so  also,  in  the  realms  of  art,  commer- 
cialism is  likewise  reducing  everywhere  the  practicable  standards 
of  public  taste — and  by  exactly  the  same  process — to  that  mini- 
mum of  beauty  and  dignity  which  will  yet  permit  that  reduced 
volume  of  patronage  which  results  in  a  maximum  of  net  profits. 

For  that  maximum  is  no  more  attained,  where  art  is  con- 


RECENT  ECONOMIC  HISTORY  423 

cerned,  when  the  grade  of  art  is  the  most  pleasing  to  the 
majority  of  the  people  than  it  is,  where  more  sordid  commodities 
are  concerned,  when  the  selling-price  is  that  most  attractive  to 
the  largest  number  of  people,  namely,  the  lowest  practicable 
price,  the  factory-system  cost.  Under  commercialism  it  is  liter- 
ally and  relentlessly  true,  of  cabbages  and  concerts  alike,  that 
the  maximum  profit  is  secured  to  the  seller  only  when  a  major 
fraction  of  all  those  who  stand  ready  to  be  attracted  have  been 
driven  away — either  by  high  prices  or  by  tawdry  quality,  or  by 
both.  Only  the  cheapest  grades  can  be  retained. 

Astounding  as  it  may  seem  to  the  aesthete,  it  is  nevertheless 
true  that  our  prevailing  standards  of  popular  art  are  neither  a 
natural  expression  of  the  people's  taste,  nor  even  an  upward 
strain  therefrom  induced  by  the  efforts  of  the  lovers  of  true  art. 
They  are,  instead,  a  long  way  below  the  people's  true  preferences 
— the  lowest  which  the  people  will  accept — exhibiting  one  of  the 
many  instances  of  forced  degradation  which  we  owe  to  our  faith 
in  commercialism. 

Astounding  as  this  must  seem  to  anyone  who  has  soaked  for 
a  lifetime  in  the  common  belief  that  commercial  "hustle"  is  the 
prime  motive  force  in  economics,  and  spontaneous  individual 
taste  the  sole  determinative  force  in  standards  in  art,  yet  it  is 
absolutely  true,  in  every  department  of  trade,  art  and  education, 
that  commercialism  paralyzes  and  degrades.  Worse  than  that, 
it  dominates,  controls  and  censors.  Taste  may  demand,  yet  the 
pocket  cannot  command,  anything  which  it  does  not  pay  the 
commercial  world  to  let  through  to  us.  Whether  it  be  supplies 
of  food,  of  fuel,  of  clothes,  of  shelter,  of  education,  of  art,  or 
even  of  religious  inspiration — wherever  such  things  (or  the  tools 
which  they  must  have)  are  bought  and  sold  for  a  profit,  or  even 
are  presented  to  us  by  the  charity  of  those  whose  life-standards 
have  been  formed  in  profiteering,  there  the  major  demand  latent 
within  the  people,  both  as  to  quantity  and  as  to  quality,  is 
rejected.  Only  that  is  passed  through  which  will  result  in  a 
maximum  profit  to  the  dealer. 

This  is  not  a  psychological  fact  in  any  degree.  It  is  merely  a 
mathematically  relentless  result  of  our  so  arranging  our 
economic  organization,  through  our  faith  in  profits  as  the  best 
form  of  industrial  reward,  that  dealers  everywhere  thus  repel  a 
major  portion  of  their  possible  trade,  simply  because  it  pays 
them  to  do  so.  If  one  could  constrain  matters  of  artistic  taste 


424  MODERN   ECONOMIC  TENDENCIES 

within  rigid  units  of  measurement,  as  one  can  commodities,  then 
the  mathematical  formulas  of  Note  1,  on  "Charging  All  the 
Traffic  will  Bear,"  would  apply  equally  to  all  matters  of  popular 
art. 

The  next  time  you  visit  Coney  Island  note  how  far  standards 
of  taste  may  be  sagged  by  being  enslaved  to  profits.  But  do  not 
be  misled  into  thinking  that  these  standards  are  the  best  which 
public  patronage  will  tolerate.  Instead,  they  are  the  worst. 
They  are  the  worst  because  the  worst  is  the  cheapest,  and  a 
profit-paid  purveyor  makes  his  best  money  on  a  restricted  volume 
of  ultra-cheap  goods,  well  advertised. 

These  degraded  standards  of  taste  represent  merely  that 
same  twenty  per  cent  of  the  real  popular  standard,  as  to  quality, 
which  Chapter  XI  depicted  as  the  actual  volume  of  trade,  in 
relation  to  the  people's  desires  and  powers,  as  to  quantity. 
Economic  equilibrium  tyrannizes  over  art  and  ethics  exactly  as 
it  does  over  nutrition.  Do  you  doubt  that  the  Coney  Island 
commercialists  would  instantly  make  these  standards  cheaper 
and  more  sordid  if  the  people  would  still  "stand  for  it"  across 
shop-counter,  to  that  twenty-per-cent  extent  which  we  have 
proven  to  be  the  commercialist's  mecca  of  maximum  profits  ? 

To  fail  to  take  some  cognizance  of  all  this  ethical  and  artistic 
loss  due  to  commercialism,  in  our  statistical  analysis,  would  be  a 
fault  indeed.  Class  m  represents  our  attempt  to  do  this.  The 
reader  is  free  to  improve  upon  the  method  if  he  is  able. 

Confusion,  as  well  as  Cheapness,  Profitable  under  Commer- 
cialism.— Then  commercialism  acts  to  vitiate,  degrade,  blunt 
and  dilute  our  standards  of  taste  in  still  another  way.  For  it 
demands,  in  the  interest  of  profits,  a  constant  outpouring  of 
numerous  new  brands  of  everything,  offered  solely  for  the  sake 
of  the  profitable  notoriety  to  be  gained  in  advertising  them. 
This  policy,  so  familiar  in  the  multiplicity  of  new  brands  of 
soap,  tobacco,  collars,  automobiles,  etc. — of  each  of  which  we  now 
have  twenty  brands  where  one  standardized  grade  of  quality  is 
needed — is  naturally  reflected  in  artistic  circles  in  the  frequent 
appearance  of  new  "schools"  of  art,  such  as  the  "cubist"  or 
"futurist"  fads  in  painting  and  music. 

Thus  in  every  walk  of  life  commercialism  has  all  but  lost  us 
our  natural  ability  to  discern  the  insincere  from  the  sincere. 
For  these  grotesque  furors  of  the  day  do  not  even  bear  witness 
of  a  sincere,  if  mistaken,  groping  amidst  the  unknown  for  sus- 


RECENT  ECONOMIC  HISTORY  425 

pected  latent  value.  They  consist  crassly  of  posing  for  effect, 
for  the  sake  of  personal  advertisement  or  profit,  exactly  as  does 
the  professional  drummer  or  promoter. 

In  this  apparently  uncharitable  indictment  no  taunt  is  flung 
at  the  individual,  but  at  that  horribly  mistaken  system  which 
condemns  to  penury  every  artist  who  has  not  yet  achieved 
notoriety,  and  which  inevitably  incites  in  most  patrons  of  art  an 
unnatural  and  unwholesome  love  of  being  in  fashion.  For  in  all 
the  less  extreme  walks  of  art,  music,  histrionics  and  lyceum- 
oratory  or  literature,  this  same  force  is  everywhere  at  work. 
Sometimes  it  is  ruinous  in  its  destructive  success.  Sometimes  it 
fails  either  to  spoil  completely  the  art,  or  to  accomplish  the 
launching  of  a  mere  fad.  But  everywhere  it  is  detrimental. 
Everywhere  it  makes  our  art  poorer  and  less  sincere  than  it 
naturally  would  be. 

Economic  versus  Moral  Dissipation. — A  final  reason  for  this 
excursion  from  economics  into  ethics,  and  for  the  inclusion  in 
Subclass  m  of  many  of  the  items  whose  presence  there  we  started 
to  explain,  is  that  they  bring  one  face  to  face  with  the  dividing 
wall  between  personal  or  moral  dissipation,  on  the  one  hand,  and 
economic  dissipation  on  the  other.  Economic  dissipation — the 
waste  of  energy  in  doing  honestly  and  well  those  things  which  do 
not  aid  the  life-support  of  the  Consumer — is  normally  conducted 
by  persons  who  cannot  at  all  be  classed  as  immoral.  But  one  of 
its  most  wasteful  economic  features  is  that  it  is  always  conducive 
to  purely  personal,  or  immoral,  dissipation  in  someone  else. 

Personal  dissipation,  on  the  contrary,  does  not  produce 
economic  dissipation,  but  ends  the  evil  in  itself.  Hence  it  is 
important  to  note  that  Subclass  m,  where  it  refers  to  personal 
dissipation  at  all,  records  not  the  moral  loss  involved  therein, 
nor  the  destructive  effects  of  bad  example  to  others,  but  merely 
the  economic  waste  of  good,  moral  human  energy  which  other- 
wise might  have  been  devoted  to  producing  food  or  shelter, 
which  was  lost  when  the  champagne  or  race-horses  were  produced 
—probably  by  the  most  moral  of  workmen. 

Indirect  Commercial  Waste: — Returning  now  to  the  more 
tangible  aspects  of  Tables  27,  28  and  29,  the  inclusion  of  a  large 
portion  of  all  transportative  activities,  and  particularly  those  of 
the  automobile-industry  (under  Subclass  p)  as  commercial  in 
character,  needs  debate. 

It  is  especially  true  of  these  industries,  over  others,  that  not 


426  MODERN  ECONOMIC   TENDENCIES 

only  do  they  bear  the  usual  parasitical  burden  of  commercialism 
in  the  securing  of  their  trade  and  the  maintenance  of  their  rates, 
but  even  those  of  their  individual  workers  who  actually  perform 
the  transportation,  or  the  manufacture  of  the  vehicles,  must  be 
classed  largely  as  "commercialist,"  in  the  sense  of  being  a  con- 
tributory cost  upon  other  industries,  because  they  perform  trans- 
portation which  would  never  occur  were  the  Ultimate  Consumer 
in  control.  It  is  unproductive  transportation  incidental  to  the 
warfare  for  profits. 

Thus  our  passenger-trains  and  hotels  are  patronized  far  more 
by  drummers  and  businessmen  than  they  are  by  those  engaged  in 
helping  the  Consumer.  Our  freight-trains  are  congested  chiefly 
by  goods  undergoing  a  shipment  which,  under  any  national 
factory-system,  they  never  would  have  incurred. 

For  instance,  the  policy  of  governmental  control  of  the  rail- 
roads by  the  British  government,  as  an  aid  to  the  prosecution  of 
the  war,  finally  resulted  in  attention  to  this  matter  of  unneces- 
sary shipments.  Great  saving  was  effected  by  limiting  shipments 
to  routes  reaching  the  Consumer  as  directly  as  possible.  Thus, 
in  a  single,  unchanging  commodity,  that  of  coal  shipped  by  land — 
only  a  fraction  of  the  total  coal-traffic — they  were  able  to  elim- 
inate over  seven  hundred  millions  of  ton-miles  annually,  merely 
by  assigning  to  certain  districts  of  mines  certain  districts  of 
population,  to  be  served  exclusively  thereby,  instead  of  permit- 
ting the  mine-owners  to  compete  with  each  other  indiscrim- 
inately in  all  districts,  as  is  normal  under  commercialism ! 

An  official  bulletin  issued  by  the  War  Industries  Board  of  the 
United  States,  under  date  of  Nov.  2,  1918,  throws  similar  light 
upon  the  manifold  savings  to  be  expected  from  the  mere  unifica- 
tion of  industry  under  single  national  guidance,  as  follows : 

"The  standard-gage  steam-locomotive  industry  of  the 
United  States,  operating  under  the  direction  of  the  War  In- 
dustries Board,  has  increased  its  rates  of  production  approx- 
imately 100  per  cent  in  the  past  three  months.  .  .  .  This 
achievement  is  particularly  noteworthy  from  the  fact  that,  in 
bringing  about  the  tremendous  jump  in  production,  it  has 
been  unnecessary  to  expend  a  dollar  to  increase  plant-facilities 
or  enlarge  the  existing  works,  items  of  considerable  expense  in 
the  development  of  most  of  the  other  war-industries  of  the 
country.  Redistribution  of  orders  and  concentration  ly  each 
of  the  plants  on  particular  types  of  locomotives  has  made 


RECENT   ECONOMIC   HISTORY  427 

possible  the  intensity  of  effort  unprecedented  in  the  industry." 
(Italics  mine.) 

In  this  remarkable  case  of  gain  in  efficiency  there  did  not  occur 
a  single  transfer  of  a  workman  from  commercial  to  productive 
fields  of  effort,  nor  a  dollar's  alteration  in  the  amount  of  interest- 
payments  involved.  Yet  these  two  sorts  of  transfer  of  energy 
from  productive  to  commercial  fields  are  the  only  ones  which  this 
book  has  attempted  to  measure,  in  its  statistical  picture  of  the 
gradual  alteration  of  the  country's  efficiency  of  economic  organ- 
ization. There  are  enormous  fields  of  waste  due  to  the  chaos 
called  commercialism  which  have  necessarily  been  omitted  from 
our  statistical  estimates  altogether. 

In  the  English  illustration  arose  no  question  of  repeated 
handlings  due  to  change  of  ownership  at  each  stage  of  manu- 
facture, upon  which  so  much  stress  has  been  laid  in  foregoing 
pages,  because  the  coal  remained  unchanged  in  form.  The 
saving  effected  was  merely  that  of  the  interminable  confusion  of 
cross-shipments  and  long  hauls,  due  to  the  anarchic  license  of 
every  mine-owner  to  sell  coal  anywhere  his  salesmen  might  find 
a  buyer. 

In  America,  where  the  distances  are  far  greater,  this  is  all 
going  on  at  a  far  greater  rate  of  loss,  in  a  long  list  of  staples, 
with  the  "repeated  stage"  phenomenon  quite  in  addition.  Pig- 
iron  is  made  in  eastern  Pennsylvania,  then  shipped  across  the 
mountains  to  be  rolled  into  bars,  which  then  travel  to  New 
England  to  serve  as  "raw  material"  in  her  many  ingenious 
industries,  finally  to  reach  Arizona  or  Oklahoma  as  supplies  for 
further  developments.  At  each  stage  manifold  negotiation  must 
occur. 

Consolidation,  so  far  as  it  has  proceeded,  has  remedied  this 
somewhat,  it  is  true.  But  the  lesson  of  these  statistics,  we  shall 
see  later,  is  that  consolidation  is  daily  becoming  less  and  less, 
relatively  to  the  whole.  There  is  such  a  continual  flood  of  new, 
unconsolidated  businesses  that  we  are  suffering  increasingly  from 
decentralization  and  confusion  of  industry. 

In  urban  traffic  it  is  the  same.  A  large  portion  of  the  office- 
workers  who  crowd  the  elevated  and  subway-trains  during  the 
rush  hours,  or  of  shoppers  who  flock  into  and  out  of  the  retail 
district  each  pleasant  afternoon,  or  of  short-distance  erranders 
on  the  surface-cars  all  day  long,  are  bound  upon  missions  which 


428  MODERN  ECONOMIC   TENDENCIES 

are  quite  unnecessary  and  unproductive,  in  the  factory-system 
sense.  Even  if  this  same  amount  of  transportation  were  ab- 
sorbed in  mere  recreation — which  might  be  partly  true  if  the 
cars  were  made  as  free  as  the  sidewalks — it  would  still  be  far 
more  profitable  to  the  community  than  now;  for  recreation  is  a 
necessity  of  life,  while  combat  is  not. 

But  as  it  is  now  it  is  sheer  waste.  It  neither  cheers  nor 
inebriates;  it  simply  worries  and  wears.  If  any  transit  or 
efficiency  engineer  sincerely  wishes  to  relieve  our  transit-systems 
of  congestion,  he  is  recommended  to  consider  first  the  elimina- 
tion of  all  passengers  who  travel  solely  in  order  to  bargain  (by 
eliminating  all  bargaining  itself),  and  of  all  shipments  of  goods 
which  change  ownership,  or  are  specially  routed,  only  in  order 
that  an  extra  profit  may  be  collected  from  the  Consumer  thereby. 

It  is  in  the  country's  potentialities  for  three  things  in  par- 
ticular— transportation,  light  and  printing — that  commercialism 
has  been  most  sinful  in  its  diversion  of  good  into  evil  ways.  It 
is  not  that  higher  profits  are  made  in  these  lines  than  in  others, 
but  that  in  these  lines  more  good,  honest  toil  is  wasted  by  diver- 
sion into  ends  which  do  no  good  to  anyone,  and  much  harm  to 
all,  than  in  any  other  field. 

As  to  automobiles,  the  position  taken  in  Table  23  is  not  that 
four-fifths  of  all  these  vehicles  are  what  is  known  as  "commer- 
cial" cars,  for  it  is  peculiarly  the  so-called  "commercial"  cars 
which  are  more  purely  employed  in  production,  while  it  is  the 
pleasure-automobiles  which  are  devoted,  indirectly,  to  commer- 
cialism as  the  term  is  used  here.  Our  position  is,  as  to  the 
"goods- vans"  (to  get  away  from  the  confusing  term  "com- 
mercial"), that  the  same  proportion  of  their  transportative 
possibilities  is  wasted  as  applies  to  railways  or  street-cars. 

Nor  is  it  our  position  that  automobiles,  when  used  for  pleas- 
ure-purposes, are  not  commonly  physically  beneficial.  It  is  that, 
even  when  these  costly  playthings  are  really  used  to  recuperate 
tired  nerves,  rather  than  for  display  or  dissipation,  they  recuper- 
ate nerves  which  have  been  exhausted  either  in  commercial 
combat  or  else  in  excesses  in  that  race  for  prominence  or 
diversion  which  is  the  inevitable  accompaniment  of  unearned  or 
fought-for  incomes. 

Moreover,  a  large  fraction  of  even  those  machines  which  are 
owned  by  salaried  or  wage-earning  producers,  are  owned  largely 
for  the  maintenance  of  position  in  this  same  race — although 


RECENT   ECONOMIC   HISTORY  429 

success  in  this  line  is  not  profitable  to  the  wage-earner  in  any 
sense,  as  it  is  in  a  narrow,  pecuniary  sense  to  the  commercialist. 
They  are  owned  because,  in  the  modern  commercialized,  con- 
gested city,  an  automobile  is  virtually  a  necessity  of  existence. 
That  is  to  say,  even  that  portion  of  the  automobiles  which  is 
able  to  prove  its  innocence  of  all  these  charges,  in  that  it  fur- 
nishes wholesome  recreation  to  true  producers,  still  falls  under 
the  shadow  of  being  a  requisite  of  a  community-life  which  has 
been  unnaturally  congested  by  commercialism  into  cities  of 
exaggerated  size.  Life  in  these  cities  has  become  all  but  intol- 
erable unless  one  can  enjoy  periodic  excursions  into  the  country; 
and  for  this  the  automobile  has  no  equal. 

But,  since  it  is  inevitable  that  during  the  next  quarter-century 
civilization  must  find  some  way  of  reversing  its  present  horrible 
and  unnatural  congestion  of  life  in  cities,  it  is  equally  inevitable 
that  the  automobile  must  recede,  relatively  speaking,  from  its 
present  dominance,  as  the  bicycle  did  during  the  preceding 
quarter-century.  The  automobile,  like  the  street-railway,  is  a 
creator,  because  a  permittor,  of  congestion  in  cities.  (See 
Chapter  XXII.)  Since  we  have  found  it  impossible  to  reduce 
to  statistical  terms,  directly,  that  most  important  item  in  the 
social  cost  of  commercialism — congestion  in  cities — the  auto- 
mobile offers  one  indirect  means  for  attaining  that  end. 

For  similar  reasons  the  bulk  of  all  the  imposing  array  of 
sanatariums,  "health-farms,"  etc.,  which  have  sprung  up  recently 
to  aid  in  staying  well  those  whom  the  congested  life  of  the  city 
has  upset,  should  properly  be  included  as  a  disguised  branch 
of  commercial  militarism,  just  as  the  cost  of  a  Red  Cross  service 
must  be  charged  as  an  item  in  the  cost  of  martial  militarism. 
Indeed,  all  the  eleemosynary  and  charitable  institutions  should 
be  classed  as  costly  departments  of  commercialism.  For  their 
employees,  although  often  performing  menial  tasks  and  always 
receiving  their  pay  in  the  form  of  wages  or  salaries,  bear  the 
same  relation  to  commercial  militarism  as  those  who  bury  the 
dead,  or  collect  battle-field  debris,  bear  to  the  activities  of  an 
army  in  the  field. 

But  here,  following  our  avowed  policy  of  being  fair  in  our 
statistics  by  balancing  one  doubt  against  another,  four-fifths  of 
the  automobile-industry  has  been  included,  and  all  the  sana- 
tariums, hospitals,  jails,  etc.,  left  out.  Thus,  the  longer  one 
ponders  upon  this  topic  of  commercialism  versus  production,  the 


430  MODERN   ECONOMIC   TENDENCIES 

more  one  will  be  impressed  with  the  fact  that  these  statistics  tell 
less,  rather  than  more,  than  the  truth. 

Social  Metabolism. — In  all  these  infinitely  ramifying  in- 
fluences of  commercialism,  penetrating  and  vitiating  every  walk 
of  life  with  evils  which  we  often  cannot  recognize  now  as  such, 
there  is  one  guiding  principle  of  which  to  be  certain.  This  is 
that  no  mistaken  or  evil  economic  influence  ever  gets  itself  con- 
verted into  good  merely  by  being  lost  to  identification  amidst  the 
maze.  In  the  intricate  metabolism  of  the  body  politic  each  atom 
of  productive  energy  works  its  constructive  good,  and  each  bit 
of  combative  commercial  poison  its  destructive  evil,  as  surely  as, 
within  the  human  body,  each  molecule  of  food  finds  itself  differ- 
entiated with  unerring  accuracy,  within  the  darkness  and  sub- 
conscious reactions  within  the  stomach,  from  each  molecule  of 
poison. 

Sometimes  we  identify  poisons  before  they  enter  the  stomach, 
by  their  inherent  nature.  Sometimes  we  identify  them  by  their 
effect  after  being  eaten.  In  the  case  of  the  body  politic  it  is  the 
same.  Sometimes  we  can  condemn  an  activity  because  it  is 
combative,  and  therefore  we  know  that  it  will  be  destructive  in 
its  effects.  Sometimes  we  observe  that  the  effect  of  some  activity 
has  been  destructive,  whence  we  may  know  that  it  must  have 
been  combative,  and  to  be  classed  as  commercialism,  rather  than 
co-operative  and  productive.  In  either  case  our  statistics  may 
err,  but  nature  never  does. 

Statistical  Conservatism. — But  whatever  error  of  this  sort  we 
may  have  made  in  Table  28,  by  our  inclusion  with  commercial- 
ism of  some  features,  such  as  those  just  discussed,  regarding 
which  the  reader  may  hold  question,  yet  this  fact  cannot  in  any 
way  vitiate  our  main  conclusions.  For  it  is  those  subclasses  of 
activity  which  are  most  unquestionably  commercial  and  com- 
bative in  their  natures  which  have  grown  more  rapidly  than  any 
of  these  more  doubtful,  outlying  factors. 

It  is  actually  true,  therefore,  that  our  inclusion  of  these  doubt- 
ful factors  in  some  of  the  later  totals,  while  it  may  have  increased 
the  apparent  total  volume  of  commercialism,  yet  it  has  appre- 
ciably diluted  the  apparent  rate  and  acceleration  of  its  growth. 
Yet  this  last  factor  is  the  one  of  the  greatest  significance  for  the 
future. 

For  it  is  not  any  particular  volume  of  commercialism  which  is 
our  best  indicator  of  our  coming  social  fate,  for  we  have  no 


RECENT   ECONOMIC   HISTORY  431 

absolute  standard  of  comparison,  but  the  rate  at  which  com- 
mercialism, relatively  to  production,  is  growing  upon  us.  For 
our  measure  of  its  volume,  however  carefully  our  numerical  data 
may  be  sorted,  is  not  a  standard  thing,  from  which  quantitative 
inferences  can  be  drawn.  We  have  had  no  past  experience  with 
commercial  crises  like  this,  from  which  to  gage  the  future 
quantitatively. 

But  what  every  man  does  possess  is  a  view  of  the  conditions 
of  the  day.  Our  morning  newspaper  tells  us,  in  one  sense,  what 
is  the  degree  of  instability  which  we  have  reached  to-day.  So, 
starting  from  that,  those  statistics  which  tell  us  that  our  progress 
in  this  direction  is  being  made  at  the  greatest  rate  carry  the 
direst  menace. 

Yet  all  this  questionable  inclusion  by  the  author  of  doubtful 
factors  dilutes,  rather  than  exaggerates  this  rate.  All  these 
facts  will  become  clearer  from  the  next  table,  Table  31. 

Relative  Rates  of  Growth. — In  order  to  exhibit  the  relative 
growth  of  the  various  subclasses  of  Tables  27,  28  and  29  in  a 
form  convenient  for  comparison,  they  are  restated  in  Table  31, 
each  in  terms  of  1000  for  the  year  1850.  Below  each  such  line 
is  given  the  growth  for  each  decade,  in  percentage.  It  must  not 
be  forgotten  that  all  these  statistics  refer  only  to  personnel,  and 
that  they  are  on  a  per-capita  basis. 

Table  31  reveals  the  relative  rates  of  growth  of  different  sub- 
classes of  activity,  from  decade  to  decade,  without  possibility  of 
question  as  to  correctness  of  classification  or  deduction.  Except 
for  the  two  estimates  at  the  bottom,  the  figures  stand  just  as 
they  came  out  of  the  census-reports,  translated  merely  into  pro- 
portions per  million  of  population. 

No  economist  may  dare  to  dodge  the  force  of  Table  31.  For 
it  shows  that  the  one  subclass  which  far  exceeds  every  other  in 
its  rate  of  growth  is  Subclass  ;'.  Yet  this  is  the  one  subclass  most 
unquestionably  commercial  in  its  nature.  The  two  subclasses 
next  following  it  in  rapidity  of  growth  are  I  and  m — classed 
respectively  as  contributory  to  and  resultant  from  commer- 
cialism. 

It  is  in  these  directions,  then,  rather  than  in  any  branch  of 
technical  art  or  learning  (in  which  we  think  that  we  are  growing 
most  phenomenally)  in  which  America  is  making  its  most  rapid 
strides  forward. 

Closely  coinciding  with  these  most  active  subclasses  is  the 


432 


MODERN    ECONOMIC   TENDENCIES 


author's  personal  estimate  of  Total  Commercialism  p.  The  only 
subclasses  among  the  productive  occupations  which  can  even 
approach  these  commercial  subclasses  in  speed  of  growth  are  d, 

TABLE  31 
RELATIVE  GROWTHS   1850  TO  1910 


Sub-Class 

1850 

1860 

1870 

1880 

1890 

1900 

1910 

Aggre- 
gate, 
1850- 
1910 

Productive  Population 

(a)  Agriculture  and  Food-sup- 
ply 

1000 

997 
0 

1375 
37 

936 

-7 

1133 
13 

1166 
17 

2565 
156 

1311 
31 

1169 
17 

1356 
36 

1569 
57 

1227 
23 

1306 
30 

1043 
5 

1340 
-2i 

934 
0 

1267 
12 

1601 
37 

2454 
-4 

1759 
34 

1355 
16 

1832 
35 

2442 
56 

1208 
-H 

1853 
42 

1047 
0 

1486 
11 

870 
-6 

1292 
2 

1733 

8 

3728 
52 

2137 
21 

1403 

7 

2457 
34 

3444 
41 

1406 
16 

2418 
30 

996 

C 

"~~  tJ 

1684 
13 

806 

—7 

1628 
26 

2522 
4 

4594 
23 

4530 
112 

1558 
11 

3514 
43 

5145 
49 

1494 
6 

3520 
45 

934 
-6 

1702 
1 

706 
-12 

1702 
t 

2905 
15 

5330 
16 

6108 
35 

1559 
0 

4497 
28 

6120 
19 

1749 
17 

4405 
25 

937 
0 

1780 
5 

607 
-14 

2086 
22 

4891 
68 

6900 
30 

9260 
52 

1636 
5 

6370 
42 

7870 
29 

1884 
8 

6480 
47 

-63 
'780 
-393 
1686 

389i 
5900 

8260 
'<336 
5370 
6870 

'884 
5480 

Growth  per  decade  (%) 

(6)  Textile  and  Clothing  

1000 

Growth  per  decade  

a+b+x  

1000 

Growth  

(c)  ]Mechanical 

1000 

Growth  

(d)  Transportation  and  Com- 
munication 

1000 

Growth 

(/)  Technical 

1000 

Growth       

Commercial  Population 
(j)  Directly  Combative  

1000 

Growth  

(k)  Mercantile  

1000 

Growth  

(1)   Munitions  and  Panoply  .  .  . 
Growth  

1000 

(m)  Divertive  and  Absorptive  . 
Growth 

1000 

Estimates 
(o)  Arts  and  Crafts  
Growth  

1000 

(p)  Total  Combative  
Growth 

1000 

RECENT  ECONOMIC   HISTORY  433 

"Transportation  and  Communication/'  and  /,  the  "Technical" 
subclass.  All  the  other  productive  subclasses  have  either  risen 
much  more  slowly  than  these,  or  else  have  actually  fallen. 

Greater  Accuracy  since  1870.— As  to  the  exact  order  of 
precedence  of  these  subclasses  in  rate  and  constancy  of  growth, 
perhaps  it  would  be  more  reliable  and  accurate  if  the  figures 
previous  to  1870  were  discarded.  This  applies  particularly  to 
technical  matters,  which  were  held  of  little  importance  and  not 
recorded  accurately  previously  to  1870.  Viewing,  then,  only  the 
percentages  of  growth  during  the  forty  years  from  1870  to  1910, 
there  results  the  order  of  precedence  in  rate  of  progress  shown 
in  Table  32. 

TABLE  32 
RELATIVE  RATES  OF  GROWTH,  1870  TO  1910 

Per  Cent 

Subclass  j.  "Directly  Combative" 426 

p.  "Total  Commercialism"  (Author's  Esti- 
mate)         249 

"          I.  "Munitions  and  Panoply  of  Commercial 

War" 247 

"        m.  " Divertive  and  Absorbent" 222 

d.  " Transportative  and  Communicative" . .       165 

/.  "Technical" 181 

c.  "  Mechanical " 65 

b.  "Textile  and  Clothing" 33 

k.  "Mercantile" 21 

a.  "Agriculture  and  Food-supply" —10 

a+b+x -35 

The  last  quantity  in  Table  32  (a-\-b  +  z)  is  based  upon  the 
reasonable  assumption  that  the  bulk  of  the  additional  population 
appearing  each  decade  in  the  census-enumeration,  as  "occupied," 
came  from  the  home  into  the  factory  and  hence  that,  previous 
to  enumeration,  it  had  been  engaged  in  the  preparation  of  either 
food  or  clothing,  The  quantity  a  +  b  +  #  therefore  represents, 
with  the  greatest  probable  accuracy,  the  total  population, 
enumerated  or  unenumerated,  which  has  been  engaged  in  all 
those  many  and  varied  tasks  which  together  create  our  supplies 
of  food  and  clothing. 

It  is  this  class  of  occupations,  therefore,  which  is  seen  to  have 
done  all  that  wasting  away  which  has  been  necessary  in  order 
to  supply  personnel  to  those  other  occupations,  some  technical 


434  MODERN  ECONOMIC  TENDENCIES 

but  chiefly  commercial,  which  have  been  so  rapidly  increasing. 
If  we  had  not  already  ascertained  (from  Tables  20  to  24,  in- 
clusive) that  our  supplies  of  raw  material  for  food  and  clothing, 
per  capita,  had  more  than  held  their  own  throughout  the  half- 
century,  while  the  supply  of  manufactured  articles  had  grown 
beyond  the  ability  of  either  statistics  or  imagination  to  follow, 
we  might  see  in  Table  32  an  immediate  prospect  of  national 
starvation  or  freezing. 

The  Prospect  of  Famine. — But  the  facts  do  not  permit  the 
prediction  of  absolute  famine.  It  is  merely  relative  famine 
which  is  imminent,  as  yet;  but  that  may  be  bad  enough  to  be 
worthy  of  serious  attention.  Plainly  we  are  not  yet  sufficiently 
informed  for  a  safe  drawing  of  conclusions  as  to  the  future. 
We  shall  not  be  so,  indeed,  until  the  chapter  upon  unemployment 
has  been  finished.  Probably  our  trouble  will  be,  as  in  Germany 
to-day,  not  that  there  is  not  enough  food  in  existence,  but  that 
masses  of  the  people  cannot  buy  it. 

Non-combatant  Costs. — Finally,  in  regard  to  subclasses  I  and 
mt  or  estimate  p,  it  must  be  said  that  it  would  be  just  as  fair  to 
estimate  the  social  burden  of  martial  war  by  counting  only  the 
soldiers  involved,  omitting  all  cost  of  munitions  and  supplies,  or 
red-cross  and  hospital  service,  all  incidental  destruction  of 
property,  and  all  interruption  to  the  pursuits  of  peace,  as  to 
estimate  the  burden  due  to  commercial  warfare  by  omitting  all 
its  indirect  but  indubitable  costs.  Even  when  we  have  included 
all  the  time,  effort  and  money  misspent  upon  silly  advertisements 
and  tawdry  amusements,  or  upon  outings  in  which  the  beauties 
of  nature  are  quite  forgotten  in  the  craze  for  speed  and  osten- 
tation, as  indirect  costs  of  our  commercialistic  organization  of 
society,  there  has  still  been  omitted  that  greatest  of  all  objections 
to  both  military  and  commercial  war,  namely,  the  misery  and 
discouragement  of  non-combatants,  in  both  belligerent  and 
neutral  territories. 

For  these  non-combatants  number  many  times  those  directly 
engaged  in  the  fight.  Not  until  attention  has  been  centered 
upon  the  ethical  costs  of  commercialism  can  the  justice  be 
realized  of  charging  against  it  certain  items  which  appear  to  be 
purely  economic  and  quite  innocent  in  themselves,  as  has  been 
done  here. 

Reform  versus  Priggishness.— To  avoid  misunderstanding  it 
should  be  added  that  there  is  no  desire  here  to  compare  our 


RECENT  ECONOMIC   HISTORY  435 

present  organization  of  society  with  some  mythical  one  in  which 
no  one  would  do  any  wrong,  nor  with  one  in  which  the  number 
of  automobiles,  for  instance,  would  be  kept  down  to  the  number 
now  used  sanely  and  wholesomely.  The  real  desire  is  merely  to 
attain  some  numerical  estimate  of  the  degree  to  which  auto- 
mobiles, theaters,  confections  and  other  harmless  things  are  now 
misused — not  because  of  inherent  individual  folly,  but  solely 
because  this  fault  in  our  method  of  social  organization,  like  the 
scattering  of  job-tickets  on  the  ground  before  the  messenger- 
boys,  offers  premiums  to  human  nature  for  misusing  them. 

Commercialism  becoming  Critical. — All  of  the  individual 
subclasses  of  commercial  effort,  apparently  excepting  "mercan- 
tile," have  shared  in  this  general  rate  of  increase  of  commer- 
cialism as  a  whole.  Subclass  /,  "directly  combative,"  has  grown 
so  rapidly  that  by  1910  it  had  already  surpassed  ninefold  of 
what  it  was  in  1850,  by  far  the  greatest  rate  of  growth  in  the 
tables.  At  its  average  rate  of  growth  during  the  sixty  years  it 
will  have  passed  twelvefold  by  1917,  and  be  approaching  four- 
teenfold  by  1920! 

On  the  other  hand,  if  its  average  rate  of  growth  for  the  last 
three  decades  (which  is  higher  than  for  the  preceding  three 
decades)  be  even  approached  during  the  present  decade — and 
there  are  many  signs  that  the  rate  is  continually  being  accel- 
erated— then  this  subclass  will  have  attained  by  1920  fifteen 
times  its  proportion  in  the  population  of  1850.  We  shall  show 
later  that  its  prosperity,  prestige  and  power  in  our  economic, 
legislative  and  social  life  has  grown  at  a  rate  even  higher  than 
this.  Our  "invisible  government"  which  Theodore  Roosevelt  so 
vigorously  condemned  begins  to  become  dimly  visible. 

Science  and  Technology  as  Aids  to  Commercialism. — While 
the  growth  of  the  technical  arts,  crafts  and  sciences  has  gone 
hand  in  hand  with  that  of  commercialism,  yet  the  point  is  not 
merely  that  the  latter  have  grown  more  rapidly — that  appar- 
ently we  cannot  have  progress  in  technique  without  a  parallel 
expansion  of  commercial  militarism.  The  point  is  that  com- 
mercialism has  been  permitted  to  grow  at  all. 

For  a  progress  in  science  of  industry  which  has  been  com- 
petent to  substitute  steadily  the  factory-system,  as  a  means  of 
production  and  interchange,  for  the  crude  and  inefficient  cottage- 
system,  during  more  than  a  century  past,  would  naturally  be 
expected  to  have  accomplished  at  the  same  time,  upon  a  national 


MODI.HN     KdONOMir    TKNDKNC!  KS 

scale,  the  abolition  of  that  feature  of  the  coitinjr  system  which 
lay  most  directly  at  the  heart  of  its  crudity  and  inefficiency. 
name/I/,  oiem'rsli //'///  imltislry.  Our  increasingly  scientific 
sociology  should  certainly  have  been  expected  lo  eliminate,  first 
of  all,  that  inosl  unfaclorylike  anarchy  called  "business." 

Yet  all   our  Itoaslcd   Icchnical   progress  has   in   reality  accom- 
plished   (he  exact   opposite  of   this.      While   the  academic,   theo- 
logically governed  colleges  of   lS,r)()  have  been  melting  gradually 
into  our  scientific  universities  and  schools  of  technology  of  UNO, 
ibis  worst  attribute  of  the  archaic  cottage  system  of  industry- 
ownership  in  industry      has  ramified  indefinitely  and  gained  ex 
ceedin^  vigor.      Indeed,  the   food    for  its  growth,  (he  oil  poured 
upon  ils  feverish   fires,  have  been  Ihosc  reri/  inventions  an<f  dis 
carcricx  /"//  pure  <ui<f  <if>i>licd  science  which   if  is  the  proud  boast 
of  flic  modern  university  to  promote. 

Yet  never  once  has  any  university  or  college,  nor  any  other 
"foundation"  by  the  wealthy  for  the  promotion  of  knowledge, 
ever  publicly,  officially  and  authoritatively  denounced  tin's  most, 
unnatural  progcn\  of  science  seduced  by  conuncrcialism.  Never 
once  has  any  individual  professor  or  lecturer  been  permitted  to 
approach  such  an  act,  on  his  personal  responsibility,  that  he  has 
not  promptly  fell  the  weight  of  academic  discipline.  Never 
once  has  any  of  the  national  technical  societies  debated,  either 
broadly  or  penetratively,  this  which  should  Ion:-;  ago  have  been 
their  tirst  professional  topic,  because  their  heaviest  responsibility, 
namely,  the  unscientific,  ant i  cllicient  'growth  of  that  particular 
and  only  original  sort  of  anarchy  called  commercialism. 

Ethical  versus  Brute  Economic  Forces.— Moreover,  it  is 
constantly  beinj;-  nr«',vd  that  all  those  social  features  which  all 
a;',rce  are  undesirable,  arc  steadily  and  gradually  bein^  elim- 
inated by  progress  in  individual  intelligence,  taste  and  morality. 
Hut  if  this  be  true  if  individual  intelligence,  taste  and  morality 
have  any  direct  power  in  the  matter  (which  they  have  not.  being 
results  rather  than  causes)  then  (heir  first  effect  must  tmrc 
been  visible  in  a  MiadMi  decrease  in  commercial  ism,  as  a 
medieval  lack  of  st/sfcni.  loir  nud  oriicr. 

Hut  this  supposition,  it  is  clear,  is  just  the  reverse  of  the 
truth.  Not  only  has  no  progress  at  all  been  made  in  the  gradual 
abolition  of  commercialism,  but  not  even  has  there  been  any 
definite  complaint  or  protest  voiced  against  it,  outside  of  the 
author's  writings,  the  tabooed  doctrines  of  socialism,  and  various 


KKCKNT    ECONOMIC    HISTORY  437 

other  radical  utterances  which  are  si  ill  loss  recognized  in  uni- 
versity envies  as  forming  n  part,  of  our  progress  in  science. 
Morci»\cr,  socialism,  which  alone  is  definite,  protests,  in  effect, 
against  only  one  aspect  of  commercialism — capitalism  and  then 
only  in  the  name  of  the  wage  earner;  hut  that  is  a  very  different, 
tiling  (as  will  he  seen  later,  in  Chapter  XXI  V)  from  a  scien- 
tific protest,  against  commercialism  as  a  whole,  and  in  the  iiiiino 
of  the  Ultimate  Consumer. 

(General,  popular,  unscientific  protest  has  heen  growing,  no 
donht.  Hut  this  dot's  not  arise  in  scientific  sources,  is  not  the 
result  of  progress  in  our  educational  intelligence,  and  does  not 
address  itself  to  the  real  cause  of  the  evil.  Instead,  it  arises 
amidst  the  general  public.  It  is  a  protest  from  the  heart,  un- 
guidcd  by  the  mind.  Its  source1  is  the  rapid  and  obvious  growth 
of  the  evil  results  themselves  of  an  institution  which  is  not  itself 
condemned  bv  any  university  in  the  land.  Its  every  aspect 
betokens  a  rapidly  increasing  confusion  of  mind,  rather  than 
growth  in  clarity  of  thought.  It  has  arisen  as  the  human  heart's 
simple-minded  response,  unions  the  uneducated  masses  rather 
than  the  college-bred  few,  to  the  repulsive  fruits  of  «M'o\\in;^ 
commercialism.  It  has  no  connection  whatever  with  any  actual 
diminution  of  that  evil. 

Finally,  this  growing  protest  does  not.  address  itself  to  any 
real  cause  whatever,  but  rather  to  a  multiplicity  of  superficial 
results,  such  as  congestion,  graft,  interruption  of  production, 
white  slavery,  divorce,  high  prices,  etc.  It  is  anything  but 
penetrative,  accurate,  consistent,  certain.  A  chaotic  confusion 
of  conflicting  ideas,  accomplishing  nothing  while  the  evil  grows, 
is  its  most  significant  characteristic.  The  only  basic  point,  upon 
which  agreement  in  spirit  can  be  found  and  this  too  is  signiti 
cant  is  that,  we  are  now  being  dosed  with  too  unvichling  a 
re\erence  for  traditional  law,  and  with  too  little  reverence  for 
the  higher  duties  of  mental  growth,  institutional  change,  equity 
of  result  and  Immunity  of  spirit. 

Certainly  up  to  l!»10,  at  least,  we  have  positive  statistical 
evidence  that  this  growing  protest  had  accomplished,  in  the 
direction  of  effective  institutional  reform,  less  than  no  result 
lit  all:  for  it  had  not  heen  able  to  prevent  the  positive  growth  of 
commercialism,  the  source1  of  all  these  evils.  It  had  not  even 
been  able  to  prevent  the  rapid  nccclfrtitinn  of  that  growth,  l>e- 
neafh  the  very  noses  of  our  schools  of  scientific  sociology. 


438  MODERN   ECONOMIC   TENDENCIES 

Automatic  Involuntariness  again. — Indeed,  so  far  as  the 
abolition  of  commercialism  is  concerned — a  program  which  de- 
mands first  the  checking  of  its  acceleration  in  growth  into,  at 
most,  a  steady,  if  positive,  rate  of  advance,  then  the  gradual 
annulment  of  that  positive  rate  into  zero,  and  finally  the  re- 
absorption  of  all  its  economic  accumulations  during  the  last 
seventy-five  years — in  so  far  as  that  program  is  concerned  we 
are  to-day  progressing  rapidly  and  acceleratingly  backwards. 
Modern  public  opinion  is  now  engaged  in  the  illuminating  task 
of  learning  that  it  is  as  helpless  against  the  growth  of  commercial 
militarism  as  it  is  against  that  of  martial  militarism.  Our 
progress  in  scientific  social  intelligence,  to  date,  has  been  exactly 
as  effective  in  controlling  the  expansion  of  commercialism  as 
the  abolition-societies  of  1830  to  1860  were  effective  in  accom- 
plishing the  abolition  of  negro-slavery — an  institution  which  in 
1860,  just  before  its  complete  collapse,  was  many  times  more 
prosperous  and  powerful  than  it  had  been  in  1830,  when  the 
abolition  movement  against  it  first  took  definite  form. 

The  abolitionists  were  as  helpless  against  slavery  as  the 
"copperheads"  were  in  their  efforts  to  annul  the  war  which 
abolished  slavery.  Both  were  as  ineffective  as  is  the  pacifist  of 
to-day,  either  to  prevent  martial  warfare  or  to  annul  that  com- 
mercialism which  they  say  is  the  cause  of  all  war.  All  such 
will  continue  to  be  quite  ineffective,  in  their  most  commendable 
sentiments,  until  we  acquire  a  real  science  of  sociology,  built 
along  the  same  lines  as  those  material  sciences  which  have  given 
us  such  awful  command  over  the  inanimate  forces  of  earth,  sea 
and  air — until  we  have  learned  to  be  as  accurately  indirect  as 
we  are  in  all  our  other  technical  lines  of  endeavor. 

When  we  wish  to  send  a  message  across  the  Atlantic  we  no 
longer  go  out  and  try  to  shout  loud  enough,  nor  to  wave  a 
signal.  Instead,  we  shovel  some  black  stones  into  an  iron 
door — and,  after  many  an  intermediate  transformation,  the 
energy  of  the  coal  travels  across  the  fogbound,  storm-tossed 
waste  with  lightning-speed.  When  we  have  learned  to  be  equally 
indirect  in  our  efforts  at  sociological  reform  we  may  first  expect 
to  see  some  signs  of  success.  To-day  we  are  merely  shouting 
and  waving. 

Wanted — a  Science  of  Sociology. — For  some  decades  now 
the  universities  and  schools  of  political  economy  have  had  piled 
up  in  their  libraries  ample  statistical  basis  for  the  detection 


RECENT  ECONOMIC  HISTORY  439 

of  this  growing  source  of  national  inefficiency;  but  in  its  diges- 
tion and  assimilation  into  world-guidance  they  have  displayed 
the  torpor  of  a  gorged  python.  If  our  national  life  and  growth 
had  been  wholesome  in  its  major  aspects,  if  our  universities 
had  been  intellectually  free,  brave  and  responsible,  if  our 
chambers  of  commerce  had  been  condemning  gaps  of  owner- 
ship between  factory  and  factory  as  rigorously  as  they  do  all 
such  within  every  factory — as  they  should  have  done — then 
commercialism  would  indeed  have  been  steadily  upon  the  de- 
crease during  these  last  sixty  years. 

Then  effort  at  production  upon  the  farm  would  have  de- 
creased only  as  it  was  replaced  by  that  technicalism  which  is 
productive  in  a  far  more  effective  sense.  Ownership-in-industry 
would  have  declined  everywhere,  because  everywhere  as  objec- 
tionable as  it  is  within  the  factory.  The  schools  would  have 
condemned  it  as  unscientific.  The  practical  men  would  have 
denounced  it  as  inefficient  and  unfactorylike.  Between  them 
they  would  have  found  means  for  its  repression — by  that  same 
consolidation  and  unification  which  has  been  proceeding  within 
the  factory,  but  much  accelerated. 

For,  even  if  this  abnormal  and  ugly  growth  had  not  yet 
yielded  to  pressure  from  the  nation's  growing  standards  of  taste 
and  intelligence,  as  promoted  by  art,  science  and  education,  yet 
it  certainly  should  have  been  expected  to  respond  to  that  vora- 
cious appetite  of  the  modern  man  of  affairs,  guided  by  the  new 
profession  of  "efficiency-engineering/'  for  mere  material  effi- 
ciency. But  exactly  the  opposite  has  occurred.  While  consolida- 
tion has  proceeded  apace  wherever  it  might  expand  private  profits, 
outside  that  field  it  has  been  so  utterly  neglected  that  we  are 
drifting  rapidly  backwards,  towards  a  chaos  of  increasingly  de- 
centralized commercial  anarchy. 

The  "practical"  man  of  business  is  not  sufficiently  practical 
in  a  broader  sense  to  see  that  what  he  gains  as  a  commercial 
militarist  he  loses  ten  times  over  in  his  domestic  role  of  peace- 
ful Consumer.  Either  the  average  businessman  cares  far  more 
for  dividends  than  he  does  for  either  national  efficiency  or 
domestic  economy,  or  else  he  is  incapable  of  any  higher  idea 
of  efficiency  than  that  enclosed  between  the  covers  of  his  ledger. 

Fate  Challenges  our  Candor.— The  fact  that  none  of  these 
intellectual  or  ethical  forces,  in  spite  of  their  admittedly 
rapid  growth,  has  had  the  slightest  effect  in  diminishing  the 


440  MODERN  ECONOMIC  TENDENCIES 

Tolume  of  commercialism,  nor  even  of  retarding  its  growth 
sufficiently  to  prevent  its  outstripping  every  other  feature  of 
social  life — nor  even  of  preventing  its  recent  acceleration — is  the 
most  serious  one  now  confronting  the  students  of  the  destinies 
of  our  world-civilization.  If  a  rapid  and  brilliant  advance  in 
culture,  as  witnessed  for  this  country  by  the  growth  of  Sub- 
class /,  will  neither  prevent  an  outburst  of  martial  militarism 
from  overwhelming  every  other  industry  of  Europe  and  America 
with  one  of  the  most  cruel  wars  of  history,  as  in  1914,  nor  be 
able  to  put  the  brakes  upon  an  even  more  rapid  advance  of  com- 
mercial militarism  here  in  America — with  its  equally  cruel,  if 
not  so  hideously  obvious,  atrocities — then  to  what  is  civilization 
to  look  forward  ? 

Is  it  not  about  time,  therefore,  that  the  universities,  with  their 
libraries  crammed  to  overflowing  with  statistical  social  data, 
were  put  under  stern  pressure  of  jrablic  opinion  to  speak  up 
with  a  little  courage  and  accuracy  of  prediction  of  social  events  ? 
With  a  true  science  at  command,  accurate  prediction  has  always 
been  easy.  With  prediction  accurately  made,  remedy  is  always 
easy. 

But  the  so-called  political  science  now  put  forth  by  our  uni- 
versities not  only  fails  to  predict  the  most  gigantic  social  events 
with  an  accuracy  adequate  to  command  public  confidence,  and 
therefore  competent  to  forefend  coming  cataclysms.  It  fails  even 
to  analyze  its  own  records  with  sufficient  acumen  to  identify  the 
larger  forces  at  work  in  our  very  midst  to-day! 


CHAPTER  XVT 

WAGES  AND  SALARIES 

UP  to  this  point  only  classification  of  population  has  been 
attempted.  Only  heads  have  been  counted.  But  from  this  point 
forward,  in  order  to  estimate  commercialism  quantitatively, 
some  attention  must  be  given  to  the  character  of  the  heads. 

So  far  as  numbers  go,  the  commercial  population  is  so  small 
a  fraction  of  the  whole — only  about  one-fifth  of  the  total  "occu- 
pied" population — that  if  no  warning  were  given  it  might  be 
considered  insignificant  and  negligible.  But  this  small  fraction 
of  the  population  includes  most  of  the  nerve,  energy,  and  high 
administrative  ability  of  the  land.  Therefore,  before  any 
estimate  of  comparative  economic  energies  may  become  possible, 
estimates  must  be  made  of  two  preliminary  things,  in  addition 
to  the  classification  of  population  just  completed.  These  two 
things  are : 

(1)  The  relative  average  ability  of  the  individuals  forming 
the  commercial  and  productive  classes  respectively;  and 

(2)  The  transfer  of  economic  energy  from  individual  to  in- 
dividual in  the  form  of  money  or  its  equivalent — not  for  useful 
service  performed  or  commodity  received,  which  would  not  be 
a  real  transfer,  but  an  interchange,  of  energy — but  money  trans- 
ferred  without  any  counterbalancing   return   of  real  value — 
life-support.     It  is  the  first  of  these  two  topics  which  forms 
the  business  of  this  present  chapter. 

When  two  individuals  who  are  to  be  compared  as  to  their 
relative  economic  magnitudes  are  both  of  them  in  the  pro- 
ductive ranks,  there  can  be  no  doubt  that  their  relative  capa- 
bilities may  properly  be  measured  by  their  relative  incomes; 
for  both  outputs  are  sold  to  and  appraised  by  the  Consumer. 
At  least,  this  is  true  of  all  individualities  except  a  peculiar  few, 
such  as  scientists  or  the  like,  the  value  of  whose  output  cannot 
be  appraised  by  the  mass  of  Ultimate  Consumers. 

441 


442  MODERN   ECONOMIC   TENDENCIES 

But  when  it  comes  to  comparing  a  producer  with  an  economic 
combatant,  does  this  still  hold  true?  If  the  fighter  be  engaged 
in  destroying  life-support,  or  in  doing  things  not  desired  by 
the  Consumer,  as  has  been  held  here  to  be  true,  and  yet  he  is 
paid  by  the  Consumer,  is  it  then  fair  to  rely  upon  his  income 
as  a  gage  of  his  ability,  or  of  his  economic  energy? 

Of  his  ability,  no.  Of  his  economic  energy,  yes.  Since 
combat  is  now  made  a  prerequisite  to  the  privilege  of  pro- 
ductive effort,  combative  ability  is  naturally  paid  at  a  very 
much  higher  rate  than  the  same  physical  ability  when  exerted 
in  productive  lines.  This  higher  pay  measures  the  larger  quota 
of  economic  energy — not  which  the  fighter  produces,  but  which 
he  abstracts  from  the  community,  and  absorbs  or  dissipates  it. 

Successful  commercial  fighters  are  paid  at  excessive  rates. 
Their  salaries,  quite  aside  from  their  incomes  from  property, 
run  into  the  tens  and  hundreds  of  thousands  of  dollars,  whereas 
those  of  the  ablest  producers  seldom  exceed  five  thousand,  and 
only  rarely  ten  thousand.  For  instance,  in  the  more  modest 
grades  of  pay,  a  commercial  drummer  will  earn  from  two  to 
five  times  the  income  awarded  to  a  skilled  machinist.  Yet  the 
average  drummer  is  far  below  the  average  machinist  in  in- 
telligence, and  in  every  other  sort  of  ability  excepting  nerve. 

The  inequity  of  this  is  recognized  here  and  there,  even 
among  businessmen  themselves.  Mr.  Mellen,  president  of  the 
New  Haven  railroad  during  its  expansive  career  which  ended 
in  its  troubles  of  1910-13,  is  quoted  by  the  Railway-Age  Gazette 
for  Nov.  14,  1913,  as  saying: 

"I  believe  that  the  paying  of  tremendous  salaries  to  cor- 
poration officials  is  a  waste  of  money.  I  believe  that  no  man 
in  the  country  is  worth  more  than  $25,000  a  year.  And  I 
know  I  would  work  fully  as  hard  for  the  New  Haven  railroad 
for  $25,000  as  I  did  for  $60,000  or  $75,000." 

But  the  fact  remains  that  these  enormous  salaries  are  paid. 
They  offer  a  striking  contrast  with  the  average  wages  or  salaries 
paid  in  the  productive  fields. 

Analysis  Resumed. — The  next  step  in  this  present  analysis 
is  to  apply  these  contrasted  rates  of  income  to  the  personnel 
of  Tables  27  to  31  to  ascertain  the  classification  and  relative 
proportions  prevailing,  as  to  the  assignment  of  purchasing-power 


WAGES  AND   SALARIES  443 

due  to  activity  to  the  several  sorts  of  vocation,  and  thus  to  the 
hundred  million  individuals  of  the  land.  When  we  have  added 
to  this,  as  will  be  done  in  a  later  chapter,  the  allotment  of 
purchasing-power  due  to  passive  capitalism,  we  shall  then  know 
the  existing  distribution  of  economic  energy  to  the  several 
destinations  listed.  In  this  task  attention  will  first  be  turned 
to  the  question  of  wages. 

Wages. — Statistics  as  to  wages  are  voluminous;  and  to  the 
degree  requisite  for  our  present  purpose,  which  is  comparative 
only,  they  are  consistent  and  reliable.  There  is  no  need  to  insert 
here  a  treatise  upon  wages.  All  that  is  desired  is  knowledge 
as  to  their  general  trend  with  the  passage  of  the  decades.  The 
following  sources  of  data  have  been  relied  upon: 

TL  S.  Bureau  of  Labor  Statistics,  Bulletin  88 — original  data 
by  Dr.  Kuczynski,  from  4034  wage-paying  establishments ; 

Bowley,  in  the  Economic  Journal  for  December,  1898; 

Bowley,  in  the  Journal  of  the  Statistical  Society,  1899 ; 

Neuhaus,  in  the  Zeitschr.  d.  kb'nigl.  preus.  Statistische  Bureau, 
1903; 

Massachusets  State  Census,  reporting  for  1904; 

Wood,  Journal  Statistical  Society,  1910; 

Dewey,  Twelfth  Census,  Special  Report  on  Employees  and 
Wages ; 

Clement  Colson,  formerly  French  Director  of  Railways,  trans- 
lated from  the  Revue  Politique  for  Aug.  10,  1913,  by 
the  Bureau  of  Railway  Economics,  Washington,  and 
quoted  in  the  Railway-Age  Gazette  for  Nov.  14,  1913. 

The  data  from  these  various  sources  have  been  brought  to 
a  common  standard  of  100  for  the  year  1910  and  then  plotted 
upon  the  same  sheet,  and  thus  averaged  graphically.  This 
results  finally  in  Fig.  2,  which  is  derived  as  follows: 

For  the  earlier  decades  the  information  naturally  comes 
chiefly  from  Europe;  but  the  figures  for  the  last  few  decades, 
which  are  relatively  complete  and  accurate  for  both  continents, 
show  that  the  general  trend  of  wages  is  closely  the  same  upon 
the  two  shores  of  the  Atlantic.  Thus  a  tabulation  of  wages 
from  1890  to  1907,  based  upon  100  for  the  latter  year,  shows 
the  parallel  variations  in  Europe  and  America  set  forth  in 
Table  33. 


444 


MODERN   ECONOMIC   TENDENCIES 


TABLE  33 
WAGES  IN  EUROPE  AND  AMERICA,  1890  TO  1907 


TT     "A«   1 

Europe 

TT      *A      J 

Europe 

ar 

United 
States 

Germany 

France 

Year 

United 
States 

Germany 

France 

(Kuczynski) 

(Colson) 

(Kuczynski) 

(Colson) 

30 

82.5 

73.1 

1899 

81.6 

82.7 

88.5 

91 

82.4 

.... 

73.3 

1900 

84.0 

85.6 

86.7 

32 

82.8 

.... 

68.1 

1901 

85.4 

84.4 

83.4 

33 

82.7 

.... 

69.1 

1902 

88.1 

81.8 

82.8 

34 

79.8 



68.1 

1903 

90.6 

83.4 

85.9 

35 

80.4 

.... 

73.3 

1904 

90.5 

86.2 

88.2 

36 

81.3 

.... 

69.5 

1905 

91.9 

88.7 

91.8 

37 

81.6 

78.2 

1906 

95.5 

96.0 

95.1 

38 

80.5 

8o!7 

84.0 

1907 

100 

100 

100 

*7 
loo 

70         1790          1810         i83o         i85o         18^0         1890       1910 

no 

100 

9° 
80 
70 
60 
60 

*P 

/ 

$0 

4o 
3o 
£0 
1O 
O 

2 

,»-. 

-c 

7( 

> 

/ 

L 

J 

/ 

X 

X 

/ 

/ 

/ 

X 

/ 

/ 

l£8o           1800          18330          i84o            i860         1880           1<JOO         Ipi 
FIG.  2.    GENERAL  TREND  OF  WAGES. 

WAGES  AND   SALARIES 


445 


The  General  Trend  of  Wages.— The  consensus  of  all  the 
above-mentioned  sources  of  information,  when  brought  into  a 
common  field  of  comparison,  such  as  Fig.  2,  amounts  to  the 
establishment  of  several  fairly  definite  periods  of  maxima  and 
minima  of  wages.  The  range  of  these  maxima  and  minima  is 
shown  graphically  by  the  rectangles  of  Fig.  2.  They  may  also  be 
stated  in  numbers,  in  terms  of  a  standard  of  100  for  the  year 
1910,  as  in  Table  34. 

TABLE  34 
MAXIMA  AND  MINIMA  OF  WAGES,  1770  TO  1914  (1910  =  100) 


Period 

Wage 

1770-1790 

Minimum 

30-  50 

1810-1815 

Maximum 

50-  90 

1830-1850 

Minimum 

40-  70 

1872-1878 

Maximum 

70-100 

1886-1895 

Minimum 

75-  85 

1907 

Rising 

95 

1914 

Still  rising,  but  more  rapidly 

107 

The  showing  of  this  table,  in  its  broadest  aspect,  is  a  general 
rise  of  wages  from  the  beginning  of  statistical  information,  in 
the  latter  part  of  the  eighteenth  century,  to  the  present  time. 
This  general  rise  has  been  interrupted  only  by  occasional  and 
moderate  relapses,  such  as  that  from  about  1812  to  1840,  and 
again  from  about  1875  to  1890;  but  the  latter  of  these  was 
more  a  mere  arrest  of  the  rise  than  a  real  lapse  of  wages. 

These  data  are  exhibited  more  clearly  in  Fig.  2.  This  figure 
displays  as  rectangles  the  general  limits  of  range  of  wages, 
over  certain  periods  which  may  be  taken  as  characterized  by 
the  maximum  or  minimum  in  question.  From  center  to  center 
of  these  rectangles  are  drawn  straight  lines  which  may  be  as- 
sumed, as  fairly  as  any  other,  to  indicate  the  general  trend 
of  wages  during  the  interims  between  maxima  and  minima. 

While  Fig.  2  corroborates,  by  the  general  trend  of  these 
straight  lines,  what  has  just  been  said  as  to  a  fairly  continuous 
rise  in  wages  during  the  last  125  years,  yet  the  rectangles  show 
that  in  certain  instances  wages  reached  a  temporary  maxi- 
mum about  a  century  ago,  from  1810  to  1815,  which  was 


446  MODERN   ECONOMIC   TENDENCIES 

never  again  attained  until  shortly  before  the  present  century 
opened.  Wood,  in  debating  wages  for  cotton-workers  from  1833 
to  1906,  remarks  that  the  former  year  was  about  a  minimum 
for  the  century,  wages  in  1806  being  about  as  high  as  in  1906. 

But  such  statements  as  these  do  not  apply  widely  enough 
to  negative  the  broadest  possible  characterization  of  the  general 
trend  of  wages  as  a  rise  from  1770  to  the  present  hour.  And 
in  so  far  as  the  temporary  maximum  of  1805-1820  departs 
from  this  general  trend  it  corroborates  what  will  be  said  later 
as  to  the  forces  guiding  the  rate  of  wages. 

Wage-coefficients. — The  series  of  straight  lines  shown  in 
Fig.  2  gives  wage-coefficients  for  the  decades  concerned  in 
Tables  27  to  31,  in  terms  of  100  for  the  year  1910.  These  co- 
efficients are  given  in  Table  35. 

TABLE  35 
WAGE-COEFFICIENTS,  1850  TO  1914 

1850 63     1880 83     1905 93 

1860 72     1890 80     1910 100 

1870 80     1900 89     1914 107 

It  is  fully  recognized  that  the  purchasing-power  of  these 
rising  wages  has  simultaneously  diminished,  in  many  impor- 
tant respects;  but  this  has  nothing  to  do  with  the  present  task, 
which  is  only  to  compare  relative  aggregate  productive  and 
commercial  energies.  For  these  energies  are  all  expressed  by 
the  two  classes,  or  by  any  sub-class,  by  purchase  in  the  same 
open  market.  Therefore  we  need  compare  now  only  dollars, 
not  purchasing-powers.  The  latter  will  be  considered  in  later 
chapters. 

Wages  in  Manufacturing. — Another  fractional  source  of 
information  as  to  variation  in  wages  is  found  in  the  United 
States  census-reports  as  to  manufactures.  This  source  is  com- 
plete in  range  of  time  over  the  sixty  years,  but  is  incomplete 
in  that  it  applies  only  to  labor  employed  in  manufacturing 
establishments.  It  is  to  be  expected  that  such  labor  must 
grade  more  highly,  in  average,  than  that  for  industry  in  general, 
which  must  include  large  portions  of  unskilled  labor.  This 
difference  might  be  expected  to  become  magnified,  as  technical 
art  progressed  with  the  passage  of  the  decades. 

Another  source  of  information  is  found  in  the  statistics  as 


WAGES   AND   SALARIES 


447 


to  railroads  furnished  by  the   roads  themselves,  under  oath, 
to  the  Interstate  Commerce  Commission. 

These  several  sources  permit  the  tabulation  of  mean  wages 
appearing  in  Table  36.  Eemembering  that  the  column  for 
"General  World  Data"  itself  represents  an  averaging,  or  "com- 
posite photograph,"  of  several  sources  of  information,  it  will  be 
clear  that  our  knowledge  as  to  the  relative  progress  of  wages 
during  the  last  sixty  years  is  fairly  consistent  and  accurate. 

TABLE  36 

WAGES,  AVERAGE  PER  ANNUM,  1850  TO  1914 


Year 

Manufacturing 
Establishments 
in 

American 
Railroads 

General 
World  Data, 
Value  for  1910 

Average   of 
Columns  2 

Coefficient, 
1910  =  100 

United  States 

Assumed  as  $550 

and  4 

1850 

$248 

$347 

$297.50 

56 

1860 

289 

.... 

396 

342.50 

64 

1870 
1880 

302 
347 



440 
456 

371 
401.50 

69* 
75 

1890 

444 

$558 

440 

442 

'  83 

1896 

544 

.... 

.... 

.... 

1900 

437 

547 

490 

461 

86 

1900 

426 

1904 

.... 

610 

.... 

.... 

.... 

1905 

477 

512 

495 

93 

1906 

571 

.... 

.... 

1910 

518 

650 

550 

534 

100 

1914 

784 

588 

Spahr  on  Wages. — Dr.  Charles  B.  Spahr,  who  has  devoted 
an  entire  volume,  "The  Present  Distribution  of  Wealth" 
(1896),  to  an  exhaustive  study  of  this  problem,  reaches  the 
following  estimates  for  the  year  1890  stated  in  Table  37.  He 
says: 

"The  average  family  income  from  labor  should  not  be  put 
higher  than  $500  in  the  towns  and  $300  in  the  rural  districts. 
.  .  .  One  per  cent  of  our  families  receive  nearly  one-quarter 
of  the  national  income,  while  fifty  per  cent  receive  barely 
one-fifth." 


418  MODERN   ECONOMIC  TENDENCIES 

From  this  fact  it  becomes  obvious  what  the  editors  must  do  in 
order  to  make  effective  their  frequent  advice  to  the  people  to 
flock  "back  to  the  land."  If  they  will  but  contribute  $200  per 
annum  to  each  person  on  whom  the  advice  is  urged  they  will 
then  have  just  come  out  to  an  even  pecuniary  inducement  be- 
tween city  and  country;  and  the  advice  may  then  turn  the 
scale  in  favor  of  the  country! 

TABLE  37 
WAGES  IN  1890— DR.  SPAHR 

Agriculture  (including  house  rent) $  306 

Mines 371 

Manufacturing  and  Mechanical  Trades 360 

Railroads 650 

Others  in  Trade  and  Transportation 548 

Teachers 250 

Ministers 900 

Physicians  and  Lawyers 1200 

Other  professions 800 

Servants  and  Laborers  (not  including  lodging) 200 

All  ethers 400 

Salaries. — When  one  turns  from  wages  to  salaries  the  data 
available  are  more  at  variance,  owing  to  the  wide  divergence 
of  class  of  labor  coming  under  the  title  "salaried,"  and  the  data 
are  to  be  had  only  for  recent  decades.  The  United  States  census 
of  manufactures  gives  data  as  to  salaries  of  "clerks  and  officials" 
dating  from  1890;  and  from  1905  on  its  differentiates  between 
the  salaried,  employees  and  the  salaried  proprietors,  firm- 
members  or  officials  of  corporations.  The  railroad-statistics  of 
the  Interstate  Commerce  Commission  give  full  data  as  to  salaries 
since  1896,  and  lumped  information  for  1890.  Information 
from  all  these  sources  is  collected  in  Table  38. 

Table  38  reveals  a  number  of  significant  surprises.  First,  the 
railroad-statistics,  which  are  the  most  direct  and  authentic  of 
any  in  their  origin,  show  an  average  salary  for  "general  officers" 
ranging  from  a  minimum  of  $2326  in  1896  to  a  maximum  of 
$3720  in  1914.  These  figures  are  very  hard  to  believe.  It  is 
common  knowledge  that  there  are  many  railroad-officers  whose 
salaries,  like  Mr.  Mellen's,  range  nearer  to  $100,000  than  to 
$10,000.  Even  the  average  vice-president  or  treasurer  must  get 
upwards  of  the  lower  figure. 


WAGES  AND   SALARIES 


449 


TABLE  38 

SALARIES,  PER  ANNUM,  1890  TO  1914 


Year 

Railroads 

Manufacturing  Establishments 

Gen- 
eral 
officers 

Other 
Offi- 
cers 

Office 
Clerks 
and 
Station 
Agents 

Actual  Salaries 
Reported 

Computed 
Salaries 

Officers, 
Proprietors 
and 
Firm 
Members 

Salaried 
Em- 
ployes 

Proprietors  and 
Firm  Members: 
Found  by  deducting 
from  the  apparent 
profits  the  percent- 
ages    on     capital 
stated 

1890 
1896 
1900 
1905 
1910 
1914 

$2632 
2326 
2688 
2508* 
3278 
3720 

$1950 
1743 
1966* 
2078 
2174 

$1512 
1555 
1532 
1427* 
1332 
1177 

'$628 
808 

$1046 
1107 
1187 

6% 

$3965 
4070 

10% 

$1720 
1372 

*  Estimated  from  data  as  to  1904  and  1906. 

If  this  be  so,  what  must  be  the  number  of  officials  who  are 
receiving  considerably  less  than  $2500  or  $3000,  if  these  averages 
be*true !  It  is  plain  that  many  very  small  roads  must  figure 
in  the  averages  co-equally  with  the  larger  systems. 

Secondly,  "office-clerks  and  station-agents"  for  railroads  have 
experienced  a  steady  decrease  of  salary  since  1890.  Since  this 
is  directly  inconsistent  with  an  overwhelming  mass  of  testimony 
to  the  effect  that  the  wage-rate  for  each  given  grade  of  labor 
has  been  steadily  rising  since  1890,  these  figures  force  the  con- 
clusion that  the  relative  grade  of  labor  going  into  this  class 
of  occupation  has  steadily  deteriorated  during  the  last  quarter- 
century. 

Also,  without  entering  at  all  the  comparative  merits  of  the 
contest  now  waging  between  the  four  unions  of  railroad- 
workers,  on  the  one  hand,  and  the  railway-corporations  on  the 
other,  it  is  proper  to  point  out  that  the  pay  of  the  unorgan- 


450  MODERN   ECONOMIC   TENDENCIES 

ized  portion  of  the  railway-servants  has  gone  steadily  down 
while  the  average  of  all  wages  was  rising.  To  those  who  do 
not  believe  in  trades-unions  or  strikes,  the  policy  of  the  rail- 
roads towards  their  non-unionized  employees  is  not  encouraging. 

The  very  small  figures  appearing  for  the  "officers,,  proprietors 
and  firm-members"  of  manufactories  is  not  equally  surprising, 
because  these  data  include  many  very  small  factories  the  officers 
or  proprietors  of  which  often  receive  no  salaries  at  all,  taking 
their  winnings  in  the  form  of  dividends  upon  stock,  if  a  cor- 
poration, or  of  divided  profits  if  a  firm. 

The  variation  in  "computed  salaries"  is  a  manifestation  of 
the  generally  recognized  policy,  of  late  years,  of  cutting  down 
the  visible  salaries  and  substituting  rewards  coming  through  the 
capitalization  instead.  From  1850  to  about  1890  the  computed 
salaries  rose  pretty  steadily.  After  that,  in  addition  to  the  con- 
scious policy  just  mentioned,  arose  the  unconscious  acceleration 
in  number  of  small,  new  establishments,  due  to  the  accelera- 
tion of  invention  of  new  appliances.  Both  forces  tended  toward 
the  reduction  of  actual,  averaged  salaries.  Further  light  as  to 
these  questions,  so  far  as  they  relate  to  manufactures,  will  be 
found  in  Table  61. 

General  Trend  of  Wages  and  Salaries. — The  general  sig- 
nificance of  the  figures  of  these  recent  tables  as  to  wages  and 
salaries  is  best  comprehended  at  a  glance  by  reference  to 
Table  39,  which  states  them  all  in  parallel  in  the  form  of  co- 
efficients based  upon  the  figure  100  for  the  year  1910.  From 
the  figures  presented  in  Table  39,  and  particularly  from  the 
two  columns  of  "assumed  coefficients"  for  wages  and  salafies 
respectively  (which  are  merely  round-number  estimates  of  a 
fair  statement  of  the  relative  rise  in  wages  and  salaries  during 
the  sixty  years)  we  are  now  for  the  first  time  in  a  position  to 
measure  approximately  the  comparative  energies  of  the  pro- 
ductive and  commercially  combative  portions  of  the  population 
respectively,  as  classified  in  Tables  27  and  28 — so  far  as  they 
find  expression  in  either  wages  or  salaries. 

There  can  be  no  hesitancy  in  undertaking  whatever  estimate 
of  this  sort  may  be  available  from  Table  39,  on  the  score  that 
its  accuracy  is  not  beyond  question.  Not  only  does  Table  39 
show  that,  for  purposes  of  relative  measurement  of  progress, 
the  evidence  from  various  sources  is  gratifyingly  consistent. 
But  more  than  that,  the  estimate  must  be  made.  Too  much 


WAGES   AND   SALARIES 


451 


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452  MODERN  ECONOMIC  TENDENCIES 

depends  upon  its  showing  for  it  to  be  longer  postponed.  Predic- 
tions as  to  the  future  destiny  of  our  land — whether  it  is  to  enjoy 
peaceful,  gradual  growth  or  is  to  burst  forth  in  violent  anarchy 
of  revolution — hang  upon  the  result.  Fundamental  policies  of 
business  and  government  will  appear  wise  or  foolish  according 
to  its  complexion :  black  or  white. 

It  is  upon  such  compilations  as  Tables  27,  28,  29  and  39, 
with  others  depending  thereon,  that  such  important  federal 
measures  as  the  so-called  Sherman  anti-trust  law,  for  instance, 
or  that  looking  toward  federal  incorporation,  with  dozens  of 
others,  must  be  classed  as  the  wisest  legislation  by  far-seeing 
statesmen,  or  the  veriest  nonsense  and  mischief — according  to 
whether  these  statistics  show_the  country  to  be  advancing  in 
one  direction  or  the  exact  opposite,  in  its  national  economic 
tendencies.  In  all  such  work  minuti®  must  be  discarded.  The 
main  truth  is  the  thing. 

Relative  Earning-Capacities. — Reviewing  all  these  recent 
tables  together,  it  is  plain  that  we  possess  fairly  accurate  data 
as  to  the  relative  progress  of  wage-rates — for  the  largest  two 
among  all  the  branches  of  industry,  namely  railroading  and 
manufacturing,  at  least;  and  thus  a  major  portion  of  the  prob- 
lem is  overcome.  For  the  other  branches  there  will  be  adopted 
here  the  following  method  of  estimate  as  to  recent  incomes  in 
the  several  classes  of  occupation  listed  in  the  tables.  However 
arbitrary  this  method  may  seem,  it  will  be  found  to  represent 
a  maximum  of  probability  of  truth,  drawn  from  all  the  indirect 
sources  of  information  listed  above.  Thus : 

For  (a)  Agriculture  and  Food-supply,  (b)  Textile  and  Cloth- 
ing, (g)  Domestic,  (h)  Miscellaneous,  part  of  (Tc)  Hucksters, 
Pedlars  and  Porters,  part  of  (I)  Book-keepers,  Clerks,  Sales- 
men and  Stenographers,  and  (m)  Divertive,  except  Actors  and 
Artists — for  all  of  these  the  estimates  of  aggregate  income  for 
the  entire  subclass  will  be  based  upon  the  next  to  the  last 
column  of  Table  36,  virtually  agreeing  with  the  next  to  the  last 
column  of  Table  39. 

For  (c)  Mechanical,  and  all  of  (I)  Munitions,  except  Book- 
keepers, etc.,  Lawyers  and  Messengers:  the  second  column  of 
Table  36. 

For  (d)  Transportation  and  Communication:  the  third  column 
of  Table  36,  carried  back  into  the  earlier  decades  by  means  of 
the  next  to  the  last  column  of  Table  39. 


WAGES  AND   SALARIES  453 

For  part  of  (e)  Clergymen:  $750  for  1910,  and  a  scale  of 
change  as  shown  by  the  second  column  of  Table  39. 

For  the  rest  of  (e)  Dentists  and  Physicians,  and  part  of  (/) 
Architects,  Engineers  and  Journalists :  $2000  for  1910,  and  the 
same  scale  of  change. 

For  the  rest  of  (/)  Librarians,  Teachers,  Professors,  etc., 
part  of  (Jc)  Merchants,  and  part  of  (ra)  Actors  and  Artists: 
$1000  for  1910,  and  the  same  scale. 

For  part  of  (I)  Messengers:  $250  for  1910,  and  the  same 
scale. 

For  part  of  (I)  Lawyers:  $2500  for  1910,  and  the  last 
column  of  Table  39  for  scale  of  change. 

For  part  of  (/)  Agents  and  Commercial  Travelers:  $1000  for 
1910,  and  the  third  column  of  Table  39  as  to  scale. 

For  part  of  (/)  Bankers,  Brokers  and  Officials  of  Banks  and 
Companies:  $3000  for  1910  and  the  last  column  of  Table  39 
for  scale. 

For  part  of  (/)  Manufacturers  and  Officials:  $2000  for  1910 
and  the  same  scale  of  change. 

For  x,  which  consists  largely  of  women  and  minors:  $300 
for  1910,  with  the  second  column  of  Table  39  for  scale  of 
change. 

While  there  is  room  for  endless  debate  as  to  the  exact  justice  of 
the  details  of  any  such  a  schedule  as  the  above,  yet  it  is  believed 
that  these  wages,  salaries  and  scales  of  advance  will  appeal  to 
the  reader  as  being  fairly  and  conservatively  founded  upon  our 
best  knowledge  as  to  the  historical  facts.  Certainly  no  fault 
can  be  found  on  the  score  of  exaggeration  of  commercial  in- 
comes beyond  their  truth,  either  as  to  the  figures  for  1910  or 
as  to  the  rate  of  increase  during  recent  decades. 

Relative  Productive  and  Commercial  Stipends.— It  is  the 
application  of  the  above  schedule  to  the  data  of  Tables  27,  28 
and  29  which  results  in  Tables  40  and  41. 

At  the  foot  of  Table  41  appears  a  statement  of  the  money 
in  circulation  in  the  United  States,  per  capita,  and  below  it  a 
line  of  ratios  between  the  aggregate  of  all  salaries  and  wages, 
also  stated  per  capita,  and  this  circulation  at  the  same  date. 
The  fair  constancy  of  this  ratio  over  a  period  of  sixty  years, 
during  which  time  nearly  everything  else  varied  widely,  is 
significant;  but  the  fact  that  money  is  gradually  ceasing  to  be 
our  circulating  medium  is  nevertheless  plainly  visible. 


454 


MODERN  ECONOMIC  TENDENCIES 


TABLE 

AGGREGATE  WAGES  AND 
(Dollars  paid  by  the  Ultimate  Consumer,  per  annum 


Productive: 

(a)   Agriculture  and  Food-supply $45 .08 

(6)    Textile  and  Clothing 4.41 

(c)  Mechanical 6.35 

(d)  Transportation  and  Communication 2 . 73 

(e)  Clergymen,  Physicians,  Dentists,  etc 2.93 

(/)    Architects,  Engineers,  Journalists,  Teachers,  Professors, 

Librarians,  etc 1 . 08 

(0)  Domestic 9 . 30 

(h)    Miscellaneous 11 .78 

(x)   Unrecorded  as  "Occupied"  in  the  Earlier  Decades. . .  27.02 

Total  "Productive" $110.68 

Commercially  Combative: 

0)    Agents,  Bankers,  Brokers,  Commercial  Travelers  and 

Officials  of  Banks  and  Companies $0.41 

(k)    Hucksters,  Merchants,  Pedlars  and  Porters  in  stores.  .  4.91 

(1)  Bookkeepers,  Clerks,  Salesmen  and  Saleswomen,  Ste- 

nographers, Lawyers  and  Messengers,  etc 2 . 71 

(m)  Actors,  Artists,  etc 0.84 

Total  "Commercially  Combative" $8.87 

Grand  Total $119.55 

Addendum :  a +b +x  l .  .  $76 . 51 


1850 


1  See  Tables 

In  the  earlier  decades  money,  we  know,  was  so  scarce  as  to 
inconvenience  the  individual  in  his  daily  transactions,  to  a 
degree  hard  now  for  us  to  realize.  Even  in  the  North  there 
was  no  approach  to  a  competent  supply  of  currency  until  the 
'seventies,  while  in  the  South  immediatly  after  the  Civil  War 
currency  was  completely  lacking,  forcing  all  trading  to  be  done 
by  barter.  Money  came  creeping  in  only  gradually  as  the  years 
thereafter. 

Yet  in  those  days  there  was  actually  a  larger  proportion  of 


WAGES  AND   SALARIES 


455 


40 

SALARIES,  1850  TO  1910 

per  capita,  for  the  various  services  specified) 


1860 

1870 

1880 

1890 

1900 

1910 

$53.94 
7.28 
8.42 
3.77 
3.45 

3.04 
11.05 
16.76 
25.52 

$60.56 
7.59 
9.86 
5.56 
3.65 

3.34 
9.99 
14.53 
26.55 

$65.54 
9.05 
11.53 
6.45 
4.13 

5.18 
9.57 
20.19 
22.06 

$68.06 
11.28 
18.60 
10.33 
4.13 

6.68 
11.18 
15.66 
17.73 

$65.91 
11.76 
18.81 
11.65 
5.03 

9.07 
10.04 
23.65 
14.00 

$77.47 
14.41 
27.80 
23.33 
5.61 

13.85 
12.30 
16.69 
6.00 

$133.23 

$141.61 

$153.69 

$163.65 

$169.92 

$197.47 

$1.07 
6.48 

4.04 
1.61 

$1.29 
8.08 

5.61 
2.60 

$2.12 

8.68 

8.13 
3.98 

$4.00 
9.53 

12.69 
6.49 

$8.46 
10.52 

16.56 
8.04 

$12.90 
12.20 

26.15 
12.05 

$13.21 

$17.58 

$22.91 

$32.70 

$43.60 

$63.30 

$146.44 

$159.19 

$176.60 

$196.35 

$213.52 

$260.77  ' 

$86.74 

$94.70 

$96.65 

$97.07 

$91.67 

$97.88 

31  and  32. 

currency  to  dealings  than  now.  The  explanation  of  this  re- 
markable statement  lies  in  the  great  and  increasing  degree  to 
which  we  now  rely  upon  bank-checks  and  notes  for  ordinary 
payments,  and  upon  stocks,  bonds,  etc.,  as  collateral  for  other 
sorts  of  transfers  of 'wealth. 

The  Basic  Economic  Contrast. — In  review  of  Table  40  it 
may  be  pointed  out  that  whereas  any  statement  of  wages  or 
salaries  paid  in  money  gives  no  clue  to  the  role  which  the  alter- 
ing value  of  gold,  or  alterations  in  money-standard  due  to  any 


456 


MODERN   ECONOMIC  TENDENCIES 


TABLE  41 

PERCENTAGES  OP  TOTAL 


1850 

1860 

1870 

1880 

1890 

1900 

1910 

Productive  to  Total.. 

92.6 

91.0 

89.0 

87.0 

83.3 

79.5 

75.7 

Rate  of  Growth... 

100 

98 

96 

94 

90 

86 

82 

Combative  to  Total.  . 

7.4 

9.0 

11.0 

13.0 

16.7 

20.5 

24.3 

Rate  of  Growth... 

100 

121 

148 

175 

225 

276 

328 

(o)  Arts,  Crafts  and 

Sciences  

$15.49 

$24.24 

$28.22 

$34  .  93 

$51  .  12 

$58  .  82 

$88.11 

Per  cent  of  Total  . 

13 

16.5 

17.7 

19.8 

26.0 

27.5 

33.8 

Rate  of  Growth.  . 

100 

128 

137 

153 

201 

213 

261 

(p)  "Truly     Comba- 

tive"   

S7.20 

$11.68 

115.96 

$21  .  00 

$32.97 

$42  .  37 

$67.13 

Per  cent  of  Total  . 

6.0 

8.0 

10.0 

11.9 

16.8 

19.8 

25.7 

Rate  of  Growth.. 

100 

132 

167 

197 

279 

329        427 

Money  in  Circulation. 

$12.02 

$13.85 

$17.51 

$19.41 

$22.82 

$26.93 

$34.33 

Ratio:  "Grand  Total" 

of  Table  40  to  Mon- 

ey in  Circulation  .  . 

9.96 

10.56 

9.09 

9.10 

8.60 

7.93 

7.58 

other  cause,  may  play  in  the  expansion  of  the  figures  as  the 
decades  pass,  yet  all  these  uncertain  factors  are  eliminated 
when  one  turns  to  the  "percentages  of  total,"  and  the  rates  of 
growth  of  these  percentages,  which  appear  in  Table  41.  What- 
ever may  have  been  the  fluctuation  in  gold  production  or  cost, 
or  however  artificial  may  be  our  present  scale  of  prices  and  cost 
of  living,  these  percentages  and  rates  show  accurately  the  rela- 
tive proportions  of  human  energy  which  are  being  devoted  by 
each  of  us,  as  we  pass  our  money  across  the  shop-counter,  to 
these  two  contrasted  destinations  respectively: 

First,  to  the  useful,  productive  effort  which  alone  creates  and 
supplies  us  with  all  things  bought  and  consumed,  including  the 
transportation  requisite  for  delivering  them  at  our  doors;  and 

Secondly,  to  the  combative  effort  which  struggles  over  the 
ownership  of  a  part  of  our  money,  including  the  money  thus 
acquired  and  that  wasted  in  the  contest — the  figures  in  both 
cases  applying  only  to  the  factors  of  wages  and  salaries. 


WAGES  AND   SALARIES  457 

Dilution  of  the  Ultimate  Consumer's  Purchasing-Power.— 

Thus  our  dollars,  in  being  increasingly  forced  into  paying  the 
commercial  fighter  for  fighting,  have  left  a  smaller  and  smaller 
percentage  with  which  to  buy  that  life-support  which  we  think 
that  we  are  buying  when  we  pass  them  across  the  shop-counters. 
In  other  words,  commercialism,  spreading  its  effects  across  the 
land  in  a  perfection  of  fluid  equilibrium,  acts  to  dilute  the 
pur  chasing -power  of  every  dollar  spent. 

Throughout  the  sixty-odd  years  reviewed  statistically  this 
dilution  of  the  Ultimate  Consumer's  every  dollar  has  been 
proceeding  cumulatively.  As  both  invention  and  growth  of 
population  have  afforded  additional  opportunity,  commercial- 
ism has  imposed  its  swelling  combat-tax  upon  the  purchasing- 
power  latent  within  each  dollar,  quite  as  water  is  added  to  the 
proverbial  church-lemonade. 

It  is  not  worth  while,  at  present,  to  trace  this  dilution  through 
our  tables  of  statistics,  because  the  important  factor  of  interest 
and  dividends  yet  remains  to  be  included.  Yet  for  the  curious 
it  may  be  pointed  out  that  the  first  line  of  Table  41  gives  the 
value  (in  cents)  of  actual  purchasing-power  latent  within  each 
dollar,  if  we  assume  that  the  dollar  has  been  diluted  only  by 
waste  in  the  form  of  wages  and  salaries  paid  to  those  who  have 
been  re  fighting  on  the  job/'  instead  of  attending  to  the  interests 
of  the  Ultimate  Consumer.  Thus  we  have  not  yet  measured  all 
the  water  in  the  lemonade. 

Conclusions  must  be  deferred  until  all  of  the  diluent  factors 
have  been  introduced  statistically.  In  passing  to  the  next  of 
these — interest  and  dividends — it  need  only  be  remarked  that, 
so  far  as  is  shown  by  the  element  of  wages  and  salaries,  as  had 
been  already  surmised  from  mere  numbers  of  people,  there  is 
no  institution  in  our  civilization  which  is  growing  at  a  rate 
anything  like  that  exhibited  by  commercialism.  Further,  so 
far  as  rates  of  pay  may  be  taken  as  an  indicator  of  personal 
ability,  commercialism  is  growing  as  rapidly  in  the  way  of 
attracting  to  its  ranks  the  more  capable,  as  much  as  it  is  in  the 
way  of  mere  numbers  enrolled. 


CHAPTER  XVII 

WEALTH,  INTEREST  AND  AGGREGATE   COMMERCIALISM 

THE  salaries  and  the  wages  of  the  economic  combatants, 
however,  do  not  alone  measure  the  transfer  of  economic  energy 
from  man  to  man  in  monetary  form,  nor  its  dissipation  by  its 
diversion  into  non-productive  channels.  Enormous  amounts  of 
such  energy  are  constantly  being  diverted  away  from  the  true 
path  between  Ultimate  Consumer  and  producer  in  the  form 
of  rent,  interest,  dividends,  profits  and  surplus;  and  these  pay- 
ments upon  capitalism,  while  not  the  controlling  factor  in  the 
growing  social  crisis,  are  yet  larger  in  amount  than  the  factor 
which  does  control,  namely,  contributory  costs  of  competition. 

Such  payments  permit  the  purchase  of  life-support  by  their 
recipients  regardless  of  any  equal  quantity  of  produce  as  a 
prerequisite,  and  lead  to_its  consumption  without  a  correspond- 
ing development  within  the  social  organism  of  any  equivalent 
productive  effort.  Such  payments,  as  well  as  the  acts  of  the 
combatants,  are  constantly  diverting  life-support  from  its  true 
cyclical  swing  between  production  and  consumption  and  back, 
and  are  dissipating  it  into  the  abysses  of  space.  Hence  they 
are  also  diluting  the  purchasing-power  of  every  dollar  in  the 
land. 

In  our  efforts  at  a  statistical  analysis  of  the  growth  of  com- 
mercialism, we  must  abandon  instantly  any  hope  of  including 
any  accurate  data  as  to  two  out  of  the  five  sorts  of  such  pay- 
ment listed  above,  namely,  profits  and  surplus.  It  is  a  fact 
ever  to  be  remembered,  to  the  credit  of  the  conservativeness 
of  the  conclusions  reached  in  this  book,  that  all  of  those  huge 
sums  currently  abstracted  from  the  Ultimate  Consumer  in  the 
form  of  net  profits  and  reinvested  surplus  have  been  unavoid- 
ably neglected  in  our  statistical  tables.  We  cannot  include  them. 
We  are  forced  to  rest  content  with  statistical  estimates  of  the 
current  volumes  of  rent  and  interest  only,  with  whatever  por- 

458 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      459 

tion  of  what  are  called  dividends  which  falls  properly  under 
these  heads. 

Wealth  in  America. — Even  when  confining  ourselves  to  the 
task  of  estimating  the  passive  interest-bearing  wealth  of  this 
country,  we  find  it  difficult.  The  results  must  be  accepted  as 
approximate  only.  Thus  Watkins  says: 

"In  the  United  States  we  have  no  such  means  for  measuring 
capital  as  in  England." 

Then,  too,  many  forms  of  wealth  which  actually  bear  in- 
terest, nominally  do  not  do  so.  But  so  far  as  the  Ultimate 
Consumer,  the  payer  of  all  interest,  is  concerned,  they  virtually 
all  do  so. 

Thus  a  corporation  owning  its  own  site  neither  pays  interest 
on  it  bodily  to  another  person,  in  the  form  of  rent,  nor  pays 
it  technically  to  itself,  as  a  rule.  Yet  its  ownership  of  the  site, 
and  the  valuation  of  this  site  in  possible  exchange  for  other 
sorts  of  property,  permits  the  corporation,  in  public  opinion  and 
the  law,  to  charge  enough  for  its  commodities  or  service  so  that 
a  margin  is  left,  large  enough  to  cover,  among  other  things, 
the  interest  upon  this  valuation  of  site.  Selling-prices  which 
fell  short  of  permitting  such  payments  or  allowances  would  be 
deemed,  by  the  commercial  public  opinion  of  the  day,  to  be 
confiscatory  of  the  corporation's  property. 

The  Ultimate  Consumer  Pays  Interest  upon  All  Forms  of 
Property. — Thus  what  is  in  reality  interest  upon  site,  con- 
tributed by  the  Ultimate  Consumer  in  the  price  paid  across  the 
shop-counter,  may  reach  its  ultimate  destination  in  the  form  of 
a  dividend  upon  stock,  or  interest  upon  a  bond,  or  as  an  exag- 
gerated salary  to  some  officer  of  the  corporation,  or  as  a  stock- 
dividend  distributed  by  a  "melon-cutting."  In  either  of  the 
forms  cited  the  payment  made  by  the  Consumer  to  the  owner 
of  the  site  is  just  as  much  true  interest  upon  the  valuation  of 
the  site,  and  properly  to  be  called  rent,  as  if  the  stock  or  bond 
holder,  or  the  official  of  the  corporation,  had  actually  owned  the 
site,  while  the  corporation,  acting  as  the  agent  of  the  Consumer, 
had  rented  it  from  him. 

In  this  way  all  property  capable  of  commercial  valuation  bears 
interest.  The  sole  exception  is  property  the  title  to  which  rests 
in  the  hands  of  all  the  people  making  use  of  it,  and-  against 


460  MODERN  ECONOMIC  TENDENCIES 

which  are  issued  no  interest-bearing  securities  owned  by  in- 
dividuals. Thus  much  governmental  property — that  portion 
represented  by  issues  of  bonds,  certificates,  etc. — bears  interest, 
paid  by  the  Consumer,  not  to  the  government  but  to  the  in- 
dividual holding  the  bonds  or  certificates.  But  gold  and  silver 
in  the  Treasury  and  not  subject  to  issue  of  currency  bears  no 
interest;  and  a  relatively  small  fund  of  United  States  notes, 
some  $375,000,000,  is  also  kept  from  doing  so  by  special  legis- 
lation. Otherwise  all  property  capable  of  commercial  valuation 
bears  interest,  against  the  interests  of  the  Consumer. 

The  Interest-Rate. — Not  only  is  the  aggregate  amount  of  all 
interest-bearing  property  now  in  question,  but  also  its  rate  of 
interest.  If  it  were  necessary  to  deal  with  the  vast  mass  of 
statistics  as  to  the  varying  rates  of  interest  upon  divers  sorts  of 
property  during  the  last  sixty  years,  the  task  would  be  a  hope- 
lessly burdensome  one.  But  there  is  no  evidence  that  the  real 
rate  of  interest  has  ever  varied  appreciably. 

Just  what  is  this  real  rate  of  interest  would  also  be  a  difficult 
question  to  answer.  Yet  even  this  does  not  concern  us  vitally 
here.  For  it  must  be  remembered  that  what  passes  in  business- 
land  as  the  market-rate  of  interest  is  in  reality  made  up  of  three 
different  elements.  These  three  are : 

First,  true  interest,  which  is  a  rate  paid  only  for  the  use  of 
a  principal  which  is  assured  of  return,  to  an  idle  owner  of 
mere  legal  title  thereto : 

Secondly,  an  insurance  of  the  principal  against  the  risk  of 
its  non-return,  owing  to  commercial  disaster;  and 

Thirdly,  salary  due  to  the  active  commercial  combatant  who 
is  most  commonly  indentified  with  commercial  loans. 

Of  these  three  the  first,  according  to  all  the  principles  of  fluid 
equilibrium  which  apply  so  obviously  to  the  world  of  valuations, 
must  be  the  same  for  all  sorts  of  commercial  property  and, 
except  for  local  or  temporary  disturbances,  the  same  for  all  times 
and  places.  It  is  the  other  two  elements  which  vary  constantly 
and  widely  from  enterprise  to  enterprise,  even  in  the  same  place 
and  time,  and  which  explain  the  wide  fluctuations  in  the  com- 
mercial or  market  rate  of  nominal  interest. 

Thus  in  new  or  isolated  communities  where  commercialism 
is  active,  as  in  a  mining-camp  (as  contrasted  with  such  places 


WEALTH,   INTEREST  AND  AGGREGATE   COMMERCIALISM      461 

as  remote  fishing-villages,  where  commercialism  and  interest  are 
alike  unknown),  or  in  temporary  conditions  of  the  money-market 
in  the  great  cities,  the  interest-rate  runs  unusually  high.  But 
as  soon  as  the  mining-camp  aspect  of  the  new  settlement  has 
worn  off,  or  the  flurry  in  stocks  is  over,  the  interest-rate  soon 
falls  into  equilibrium  with  that  normal  in  the  larger  commercial 
centers,  with  which  the  world  maintains  constant  exchange  of 
commodities  and  money. 

Thus  at  all  times  during  the  sixty  years  here  under  analysis 
there  have  been  extant  some  securities  which  apparently 
"earned"  rates  varying  anywhere  from  zero  to  twenty  or  more 
per  cent  upon  their  nominal  or  face  value.  But,  except  for 
considerations  of  risk  or  labor  just  excluded  from  true  interest, 
there  have  been  no  such  variations  in  rate  based  upon  their 
market-valuation. 

The  market-valuation  of  all  paper  securities,  just  as  of  all 
other  commercial  property,  varies  to  meet,  and  is  determined  by, 
its  earning-power — not  its  earning-power  or  interest-rate  to  meet 
its  true  value.  This  is  the  principle  so  ably  set  forth  by  Pro- 
fessor Fisher.  It  applies  to  paper  securities  equally  with  the 
orchard  used  by  Fisher  in  illustration.  Even  bonds,  the  steadiest 
of  all  forms  of  security,  regularly  have  their  market-valuation 
computed  away  from  their  face-value,  in  order  to  modify  their 
declared  and  fixed  rate  of  interest  into  coincidence  with  the 
varying  market-rate  of  interest. 

The  Volume  of  Commercial  Property. — Securities  are  con- 
stantly being  issued  in  a  volume  in  excess  of  the  ability  of  the 
public  to  "digest"  or  "absorb"  (or  in  reality,  to  pay  interest 
upon)  them.  This  is  the  fundament  of  all  commercial  policy. 

In  the  beginning  this  policy  was  known  only  to  the  bankers 
alone.  Early  in' the  administration  of  our  railroads,  soon  after 
the  policy  of  state-enterprise  had  resulted  in  failure,  this  policy 
was  appreciated  and  adopted;  and  hence  these  properties  with 
the  mining-enterprises,  have  always  been  familiar  objects  of 
financial  speculation.  For  mining  properties  have  always  been 
inevitably  so  permeated  with  the  gambling  spirit  that  there  was 
scarcely  a  time  when  they  were  not  the  subjects  of  active  specula- 
tion. 

But  it  was  a  comparatively  recent  and  marked  event  in  the 
history  of  finance  when  "the  industrials,"  representing  the  larger 
manufacturing  enterprises,  appeared  upon  'Change.  Since  that 


462  MODERN   ECONOMIC   TENDENCIES 

entrance  almost  every  conceivable  sort  of  commercial  venture 
has  contributed  its  quota  of  paper  securities  to  the  mass  being 
constantly  tossed  back  and  forth  upon  the  tempestuous  sea  of 
the  speculative  exchanges. 

It  was  the  marked  success  of  the  railroads  and  mines  as 
instruments  for  the  accumulation  of  paper  wealth  during  the 
period  which  extended  forward  from  1864,  broken  only  by  the 
panic  of  1873  and  the  lesser  reaction  in  each  of  the  next  two 
decades,  which  created  among  the  wealthy  a  demand  for  "oppor- 
tunities for  investment"  so  urgent  as  to  force  the  industrials, 
enterprise  by  enterprise,  into  the  financial  field.  This  policy 
has  prospered  and  expanded  until  now  this  opportunity  for 
investment, — originally  defended  upon  the  ground  that  if  the 
capitalists  had  not  invested,  in  response  to  the  (unrecorded) 
demand  of  the  people  that  they  should  do  so,  no  expansion  of 
facilities  would  have  been  possible — is  now  claimed  as  if  it  were 
an  inherent  right  of  man.  There  is  no  finer  instance  of  the  way 
in  which  modern  capitalism  consists  in  re-invested  dividends 
than  this  gradual  spread  of  commercialism  over  the  productive 
system  of  the  land,  as  fire  creeps  over  prairie-grass. 

But  our  present  concern  is  merely  to  attain  an  estimate  of 
the  aggregate  accumulation  of  commercial  property,  and  of  a 
flat  interest-rate  thereon  which  may  be  reasonably  assumed  to 
represent  the  average  commercial  rate;  that  is  to  say,  true  in- 
terest, plus  insurance  against  loss,  plus  reward  for  current  effort 
in  promotion.  From  the  usual  rate  upon  United  States  Govern- 
ment bonds,  which  are  ordinarily  owned  by  those  primarily 
desirous  of  security  from  doubt  as  to  the  permanence  of  the 
principal-value,  and  disliking  active  commercial  exertion,  the 
true  rate  of  pure  interest  may  be  taken  as  lying  between  three 
and  four  per  cent. 

But  because  a  proper  estimate  of  commercialistic  transfer  of 
energy  through  interest-payments  must  take  just  as  much  cog- 
nizance of  the  cost  to  the  public  of  the  risks  constantly  being 
incurred  in  commercial  warfare,  as  well  as  that  due  to  mere 
pressure  created  by  passive  ownership,  we  must  accept  the 
average  gross  interest-rate  as  we  find  it.  Even  where  it  repre- 
sents risks  rather  than  true  interest,  we  have  no  other  statistical 
measure  of  the  cost  of  these  risks  to  the  public  than  the  gross 
interest-rate. 

Therefore  no  space  will  be  wasted  here  in  a  fruitless  debate  of 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      463 

the  mass  of  detailed  data  bearing  upon  the  question  of  what  is  a 
fair  average  of  interest  and  dividend  rates,  which  in  practice 
vary  all  the  way  from  zero  to  forty  per  cent.  Six  per  cent  is  a 
standard  commonly  accepted  on  both  sides  of  the  Atlantic  as  a 
"reasonable"  rate — although  the  strenuous  efforts  of  our  own 
Interstate  Commerce  Commission  at  finding  anything  reason- 
able at  all,  on  which  to  base  a  standard  rate,  have  failed.  This 
is  a  figure  toward  which  the  commercial  world  usually  adjusts 
itself,  up  or  down,  as  best  it  may. 

But  this  rate  represents  merely  a  popular  tradition,  rather 
than  anything  natural.  It  has  been  found  by  the  commercialists 
to  be  better  to  adjust  the  current  volume  of  issue  of  securities 
50  that  the  mean  net  rate  will  fall  near  to  what  the  public  is 
accustomed  to  regard  as  right,  than  it  is  to  flout  public  super- 
stition unnecessarily  by  crowding  the  rate  in  either  direction. 

The  Aggregate  Interest-Burden  upon  the  Ultimate  Con- 
sumer.— But  it  must  never  be  forgotten  that  the  real  rate  of 
interest,  so  far  as  the  aggregate  burden  upon  the  Ultimate  Con- 
sumer is  concerned,  is  measured  both  by  the  volume  of  securities 
outstanding,  and  by  their  market-valuation,  as  much  as  it  is  by 
the  nominal  or  apparent  rate  of  interest.  It  is  the  product  of 
volume-times-valuation-times-apparent-rate  which  is  alone  of 
importance  to  the  Ultimate  Consumer. 

The  law  of  equilibrium  which  determines,  from  moment  to 
moment,  these  three  current  factors  in  daily  business-life  con- 
sists, first,  of  a  balance  of  this  gross  product,  or  aggregate  burden 
of  interest,  against  the  resistant  life  of  the  Ultimate  Consumers, 
to  determine  "the  maximum  (interest-charge)  which  the  traffic 
will  bear."  This  aggregate  is  therefore  capable  of,  and  obviously 
is,  growing  upon  us  as  we  learn  to  endure. 

Secondly,  in  obedience  merely  to  the  aforesaid  popular  tra- 
dition or  superstition  in  favor  of  six  per  cent,  as  a  "reasonable" 
figure  for  the  interest-rate,  the  volume  of  securities  outstanding 
is  then  so  adjusted  up  or  down,  from  time  to  time,  by  expansion 
or  contraction,  or  by  accelerating  or  retarding  the  rate  of  issue — 
all  subconsciously,  of  course — so  that  neither  will  the  investing 
public  become  alarmed  by  an  apparent  rate  of  interest  too  far 
below  this  traditionally  proper  six  per  cent,  nor  will  the  con- 
suming public  become  unnecessarily  indignant  at  a  rate  too  far 
above  this  sacred  figure. 

For  there  is  absolutely  no  reason  other  than  this  why  the 


464  MODERN   ECONOMIC   TENDENCIES 

apparent  rate  should  not  be  two,  twelve  or  twenty  per  cent,  as 
well  as  six.  The  commercial  world  could  easily  adjust  its  rate 
of  issue  of  securities  to  make  the  rate  either  of  these  figures. 
Its  aggregate  profits  would  be  the  same  in  either  case.  So  would 
be  the  total  burden  upon  the  public. 

The  modern  world  of  "practical"  businessmen  is  ruled  just  as 
blindly  by  an  unreasoning,  superstitious  faith  in  the  sacred 
reasonableness  of  "six  per  cent  per  annum"  as  any  past 
worshipers  of  any  self-made  idol  have  ever  been.  Therefore  we 
also  may  accept  the  figure  of  six  per  cent  as  a  "reasonable"  rate. 
It  is  exactly  as  reasonable,  and  no  more  so,  than  any  other.  But 
the  people  will  be  less  likely  to  find  fault  with  that  rate  than 
any  other,  and  the  purpose  in  hand  is  such  that  no  appreciable 
error  will  have  entered  our  final  conclusions,  even  had  five  or 
seven  per  cent  been  a  figure  better  fitting  the  valuations  of 
principal  stated  statistically. 

Statistical  Data. — About  the  only  source  of  information  as 
to  the  history  of  the  growth  of  aggregate  fixed  wealth  in  the 
United  States,  as  contrasted  with  the  current  production  of 
wealth,  is  to  be  found  in  the  census-statistics.  These  have  been 
digested  and  reported  in  a  compact  form,  useful  to  the  busy 
man,  in  the  "Statistical  Abstract,"  published  annually  by  the 
Government.  These  data  cover  real  estate  and  the  improvements 
upon  it,  farms  and  farm-implements,  manufacturing-machinery 
and  tools,  and  the  railroads  (steam  and  electric),  canals,  water- 
works, electric-light  and  power  stations,  telegraph  and  telephone, 
etc.  Also  bank-loans  and  surplus,  savings-bank  deposits  and 
public  debt — federal,  state,  county  and  municipal. 

The  census-reports  do  not  give  separate  information  as  to  the 
volume  of  paper  securities  issued  against  all  this  "personal" 
property,  as  the  census  styles  it.  As  to  this  only  indirect  light 
may  be  had,  chiefly  from  the  reports  of  the  New  York  Journal 
of  Commerce  as  to  the  current  annual  listings  of  stocks,  bonds 
and  short-term  notes  on  the  New  York  Stock  Exchange,  which 
reports  are  continuous  since  1885. 

But  this,  of  course,  is  only  a  partial  revelation  of  the  volume 
of  such  securities  constantly  undergoing  speculative  exchange, 
even  in  New  York  City  alone.  Since  the  census-reports  as  to 
aggregate  wealth,  which  are  the  most  reliable  data  and  the  only 
ones  dating  back  to  1850,  include  these  securities,  in  a  way,  as 
a  measure  of  the  commercial  valuation  of  what  it  lists  under  the 


WEALTH,   INTEREST  AND  AGGREGATE   COMMERCIALISM      465 


I 

s 


466 


MODERN  ECONOMIC  TENDENCIES 


guise  of  tangible  property,  it  is  not  of  primary  importance  that 
any  separate  estimate  of  securities  be  made.  But  as  a  check 
upon  the  other  figures,  and  for  a  general  illumination  of  the 
situation,  such  an  estimate  is  worth  while,  and  is  therefore  in- 
cluded in  Table  42. 

In  Table  42  the  figures  in  parenthesis  represent  estimates 
from  more  or  less  approximate  data.  The  figures  for  1915  are 
partly  data  of  actual  record  and  partly  estimates  formed  by  con- 
tinuing the  curves  drawn  from  the  data  for  previous  decades. 
For  1920,  of  course,  all  the  figures  are  estimates  of  this  nature. 

TABLE  43 
RELATIVE  RATES  OP  GROWTH,  ALL  QUANTITIES  PER  CAPITA 


1880 

1890 

1900 

1910 

1915 

1920 

A.  1880  =  100 
U.  S  Census  Total   

100 

119 

134 

207 

238 

283 

Ditto,  less  Real,  Farm  and  Public 
Debt  

100 

96 

111 

176 

248 

320 

N.  Y.  Stock  Exchange  Securities  . 

B.  1890  =  100 
U  S  Census  Total 

100 

145 
100 

246 
112 

373 
174 

431 
205 

490 
?37 

Ditto,  less  Real,  Farm  and  Public 
Debt  

100 

115 

183 

257 

332 

N.  Y.  Stock  Exchange  Securities  . 

... 

100 

170 

257 

297 

337 

The  sole  purpose  of  that  portion  of  Table  42  lying  below  its 
first  line  is  to  gain  some  idea  of  the  relative  proportions  of  the 
parts  making  up  the  total  wealth,  and  in  particular  that  of  paper 
securities,  and  to  achieve  some  sort  of  check  upon  the  accuracy 
of  the  first  line  from  independent  sources  of  information.  It 
will  be  noticed  that  these  "separate  estimates,"  which  are  based 
partly  upon  data  taken  from  other  portions  of  the  census-reports 
and  are  partly  independent,  check  with  the  United  States  census 
aggregate  within  15  per  cent  for  1880,  the  earliest  decade  at- 
tempted, and  within  from  two  to  ten  per  cent  for  the  later 
decades. 

The  purpose  of  Table  43  is  merely  to  present  clearly  the 
relative  rates  of  growth  of  the  three  different  measures  of 
aggregate  commercial  wealth  respectively.  Whatever  the  method 


WEALTH,    INTEREST   AND   AGGREGATE   COMMERCIALISM      467 

of  measurement,  the  volume  of  paper  securities  is  seen  to  be 
constantly  surpassing  the  volume  of  valuation  of  property,  even 
in  its  commercial  sense.  It  is  particularly  to  be  noted  that  all 
of  these  figures  are  displayed  from  a  per-capita  basis. 

In  all  of  the  tables  which  include  values  for  1920,  these  last, 
of  course,  are  estimates  or  extrapolations  from  the  data  available 
up  to  1915.  Further,  these  estimates  were  made  without  any 
attempt  to  include  that  enormous  expansion  in  our  burden  of 
interest-bearing  securities  due  to  the  financing  of  the  Great  War. 
They  give  merely  what  would  probably  have  been  our  burden  of 
commercialism  if  the  war  had  not  occurred. 

The  Soul  of  the  Body  Economic:  Table  44. — Basing  our 
figures  upon  the  first  line  of  Table  42  and  relying  upon  the  flat 
interest-rate  of  six  per  cent,  a  combination  of  Tables  39  and  40 
gives  a  final  and  complete  view  of  the  relative  proportions  of  the 
Ultimate  Consumer's  money  and  economic  energy  which  go 
respectively  to  supporting  his  life  and  to  economic  dissipation 
in  commercial  combat  or  leakage.  The  result  is  displayed  in 
Table  44,  in  which  all  quantities  are  measured  in  dollars  per 
capita  of  total  population  per  annum. 

Net  Efficiency  of  Economic  Organization.— The  central 
lines  of  Table  44,  with  their  translation  into  Table  45,  form  the 
goal,  the  central  nucleus,  the  pivotal  point  of  this  entire  work, 
in  its  statistical  aspect.  Our  effort  from  the  start  has  been  to 
determine,  first,  the  total  human  energy  available  in  the  in- 
dustro-commercial  field  for  the  life-support  of  the  Ultimate 
Consumer,  at  each  decade  of  our  history;  and  secondly,  the 
proportion  of  that  energy  which  was  dissipated  in  commercial 
combat  or  militarism.  This  end  has  now  been  accomplished. 

But  the  real  significance  of  the  result  will  not  be  fully  obvious 
until  it  has  been  translated  into  relative  proportions — into  per- 
centages showing  to  a  cent  the  dilution  of  the  Ultimate  Con- 
sumer's Dollar,  as  in  Table  45. 

But  before  turning  to  Table  45  attention  is  called  to  the  last 
line  of  Table  44,  giving  the  ratio  of  the  "Grand  Total"  to  the 
volume  of  money  in  circulation.  This  shows  much  greater 
constancy,  now  that  interest  and  dividend  payments  have  been 
included,  than  in  Table  40.  While  a  gradual  decrease  in  this 
ratio  is  still  obvious,  amounting  to  about  0.30  (or  3  per  cent) 
per  decade,  showing  the  influence  of  the  increase  in  the  use  of 
various  forms  of  credit-instrument  to  augment  the  governmental 


468 


MODERN    ECONOMIC   TENDENCIES 


8    8 

t*         <N 


8 


o      oo 

CO         i-t 

i  § 


§ 


s   § 


S 


8 


I 


i    8 


e 


§ 


00 


8 


55     SS 
co      c> 

-    « 


fe 


Co 
In 


^&IS.S. 


in 


WEALTH,   INTEREST  AND  AGGREGATE   COMMERCIALISM     469 


circulating  medium,  yet  the  furthest  variation  of  this  ratio  away 
from  an  even  constancy,  or  from  the  average  for  the  seven 
decades,  was  to  thirteen  per  cent  above  average  in  1860  and  to 
eight  per  cent  below  average  in  1900. 

TABLE  45 

THE  EXPANSION  OP  COMMERCIALISM,  1850  TO  1920 
(Per  Capita  of  Population) 

Percentages  of  Total  Industro-Cemmercial   Energy  put  forth,   or  THE 
GRADUAL  DILUTION  OF  THE  CONSUMER'S  DOLLAR  BY  COMMERCIALISM 


1850 

1860 

1870 

1880 

1890 

1900 

1910 

1915 

1920 

Production.  .  . 

80.2 

75.1 

72.0 

67.2 

63.3 

59.9 

53.5 

(51.0) 

(49.6) 

Commercialism 

19.8 

24.8 

28.0 

32.8 

36.7 

40.1 

46.5 

(49.0) 

(50.4) 

Interest  alone  . 

13.4 

17.4 

19.0 

22.8 

24.0 

24.7 

29.3 

(31.6) 

(32.4) 

Relative  Rates  of  Growth  (1850  =  100) 


Production  .  .  . 
Commercialism 

100 
100 

94 
124 

90 
141 

84 
166 

79 
185 

75 
202 

67 
235 

64 
247 

62 
254 

New   York   Stock   Exchange   Securities    (1890  =  185)    in   Proportion   to 

Grand  Total 


185 

285 

332 

351 

360 

The  Ultimate  Consumer's  Purchasing-Power. — Table  45 
translates  the  results  of  Table  44  into  percentages.  Since  the 
dollar  happens  to  consist  of  one  hundred  cents,  Table  45  also 
shows,  in  the  line  labeled  "Production,"  the  actual  power  for 
purchasing  life-support  embodied  in  the  Ultimate  Consumer's 
dollar,  stated  in  cents.  Similarly,  the  line  labeled  "Commer- 
cialism" shows  the  number  of  cents'  worth  of  dilution,  or  diluitsf 
present  in  each  dollar  spent.  Taken  together,  these  two  lines 
show  in  the  simplest  possible  manner  the  destination  of  the 
Ultimate  Consumer's  money,  according  to  the  most  conservative 
estimates,  after  he  has  mistakenly  let  it  slip  across  the  shop- 


470  MODERN   ECONOMIC   TENDENCIES 

counter,  ticket-shelf  or  cashier's  window  without  insisting,  in 
an  organized  unit  for  the  country,  upon  the  assertion  of  that 
natural  sovereignty  over  all  matters  economic  which  is  inherent 
in  the  Ultimate  Consumer. 

Our  Mysterious  Economic  Cancer  Identified. — If  the  pub- 
lisher would  have  permitted  the  use  of  type  an  inch  high  it 
would  have  been  employed  for  the  first  two  lines  of  Table  45. 
For  these  simple  lines  of  statistics  tell  more  accurately  than  any 
entire  treatise  upon  political  economy  (although  they  cannot 
pretend  to  include  more  than  a  part  of  the  sad  news)  what  is  the 
matter  with  modern  society.  Yet  all  the  orthodox  treatises  in 
sociology  omit  this,  the  only  firm  foundation  for  the  entire 
question. 

Social  Malnutrition, — Society,  it  must  be  realized,  is  now 
ailing  merely  from  malnutrition,  due  to  the  circulation  within 
its  veins  of  a  diluted  circulating-medium,  of  sheer  bogus  money 
— of  money  which  is  perfectly  good  in  a  legal  sense,  or  in  a 
banking  sense,  ~but  which  is  steadily,  rapidly  and  acceleratingly 
becoming  bogus  in  a  life-supporting  sense,  by  the  increasing 
dilution  of  its  purchasing-power  through  commercial  combat. 
Yet  all  those  financial  and  economic  authorities  who  have  been 
so  tremendously  worried  in  past  years  over  the  possible  inflation 
of  the  currency  through  poor  banking-methods,  bimetallism, 
green-backism  or  the  like — all  of  which  worry  is  proper  enough 
in  its  true  perspective — are  taking  no  cognisance  whatever  of 
this  utter  ruination  of  our  national  circulating-medium  through 
commercialism — through  a  system  so  obviously  inefficient  and 
impracticable  that  they  exclude  it  religiously  from  their  own 
premises,  but  which  they  condone  flagrantly  when  operated  out- 
side, to  their  own  pecuniary  profit  and  to  their  immeasurable 
loss  in  every  other  way. 

This  malnutrition  of  the  community,  it  is  to  be  remembered, 
through  our  reliance  upon  a  circulating-medium  lacking 
economic  vitamines,  is  social,  and  not  individual.  It  may  result 
in  literal  malnutrition  of  the  individual,  in  any  given  case,  or 
it  may  not.  But  what  it  does  surely,  always  accomplish  is  a 
malnutrition  of  each  individual  in  some  one  or  more  respects — 
here  in  food,  there  in  fresh  air,  anon  in  ideas,  elsewhere  in 
morals,  etc. — and  virtually  everywhere  in  a  sense  of  justice 
toward  one's  fellowman.  To  chase  to  their  lairs  all  these  in- 
direct, yet  inevitable,  results  of  this  economic  malnutrition 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      471 

would  require  a  separate  treatise  each  upon  ethics,  morals,  edu- 
cation, insanity,  revolt,  etc. 

Social  Autointoxication. — For  this  mere  malnutrition  of  the 
body  economic  is  not  the  whole,  nor  the  worst,  of  the  trouble. 
This  commercial  diluent  of  our  economic  life-blood  turns  out, 
upon  further  investigation,  to  be  permeated  with  an  organic 
poison.  It  not  only  afflicts  us  with  a  social  debility,  so  that  we 
cannot  maintain  production  steadily.  It  also  curdles  all  our 
natural  milk  of  human  kindness  into  bitter  discontent  with  life, 
into  an  over-readiness  on  every  hand  to  accuse  others  of  personal 
fault,  in  an  attempted  explanation  of  the  faults  of  a  wrong 
system  as  due  to  individual  wickedness. 

Yet  it  must  be  increasingly  obvious  to  every  one  of  us  who 
possesses  a  candid  mind  that  the  great  majority  of  other  people 
are  trying  just  as  hard  as  ourselves — or  are  trying,  at  any  rate — 
to  get  along  with  this  impossible  system,  or  lack  of  system,  in  as 
decent,  humane  and  Christian  a  way  as  is  compatible  with  self- 
preservation.  The  widely  cherished  faith  in  a  humanity  so 
wicked  as  to  explain  humanity's  major  acts  is  daily  becoming  so 
absurd  as  to  be  untenable.  It  is  not  the  wickedness,  but  the 
stupidity,  of  mankind  which  explains  its  evil  acts — a  stupidity 
crystallized  into  fixed  institutions  and  traditions  which,  when 
once  adopted,  cannot  easily  be  altered.  Yet  stupidity  can  be 
cured,  where  inherent  wickedness  cannot. 

The  Endless  Struggle  between  Capital  and  Labor  a  Side- 
issue. — Thus  it  becomes  plain — and  with  a  first  stage  of  mathe- 
matical accuracy  in  proof  of  the  fact — that  the  trouble  in  the 
world  to-day  lies  not  at  all  between  capital  and  labor,  in  any 
basic  or  causative  sense.  It  does  not  lie  in  the  pay-envelope  at 
all,  but  in  what  the  pay-envelope  will  buy.  The  issue  lies  solely 
between  the  hundred  million  Ultimate  Consumers,  on  the  one 
hand,  and  the  institutional  effects  upon  themselves  of  their 
blind  faith  in  ownership-in-industry,  on  the  other — finding  first 
expression  at  the  shop-counter  and  at  the  emplojonent-window. 
The  last  named  topic  remains  yet  to  be  debated ;  but  it  is  one  of 
the  most  important  resultants  of  commercialism  on  the  long  list 
of  such. 

But  no  space  will  be  taken  at  present  for  emphasizing  here  the 
full  importance  of  Table  45 ;  for  this  entire  volume,  and  several 
more,  would  be  required  to  portray  the  ultimate  significance  of 
these  few  lines  of  figures,  when  translated  into  human  life. 


472  MODERN   ECONOMIC   TENDENCIES 

Neither  the  author  nor  any  of  his  readers,  except  those  few 
whose  professions  may  call  them  into  the  slums,  the  prisons,  the 
asylums  and  the  morgues,  can  comprehend  into  what  horrid 
depths  of  degradation  humanity  is  now  daily  being  indirectly 
hired  and  forced  to  sink,  merely  by  that  dilution  of  our  purchas- 
ing-power and  hiring-power  which,  in  the  upper  line  of  Table 
45,  is  recorded  crassly  as  so  many  cents  gone  out  of  each  dollar 
spent  anywhere  in  the  land — the  decimal  measure  of  the  degree 
to  which  human  energy  is  everywhere  increasingly  being  forcibly 
diverted  away  from  the  natural  and  wholesome  channels  of  pro- 
ductive life,  by  the  automatic,  subconscious  workings  of  com- 
mercialism, and  dissipated  into  what,  in  the  human  world,  cor- 
responds to  the  cold,  lifeless  darkness  and  oblivion  of  inter- 
stellar space  in  the  material  world. 

The  remaining  lines  of  Table  45  are  sufficiently  self-explan- 
atory. They  exhibit  in  convenient  form  the  relative  rates  of 
growth  of  the  principal  economic  factors  considered.  In  par- 
ticular, the  last  line  shows  how  one  feature  of  commercialism, 
interest-bearing  securities,  appears  to  be  growing  in  volume  per 
capita  of  total  population  more  rapidly  than  is  commercialism 
as  a  whole.  Since  interest-bearing  securities  form  the  explosive 
element  in  the  economic  crisis — the  detonator  being  commercial 
competition — this  fact  looms  as  of  especial  significance. 

Our  National  Economic  Efficiency. — In  view  of  the  em- 
phasis now  rife  in  all  engineering  and  administrative  circles 
upon  efficiency  of  organization,  Tables  38  to  45  are  most  dis- 
couraging ;  for  they  express  accurately  a  thing  of  which  we  are  all 
more  or  less  vaguely  conscious,  namely,  the  gradual  degradation 
of  our  national  efficiency  of  economic  organization,  when  gaged 
by  no  more  hypercritical  standard  than  the  familiar  factory- 
system  as  one  hundred  per  cent,  from  not  over  eighty  per  cent 
in  1850  to  something  less  than  fifty  per  cent  now — for  these 
tables  do  not  exhibit  all  of  the  unwelcome  truth.  They  show 
this  as  due  to  nothing  more  mysterious  than  a  mere  neglect  of 
organization,  where  organization  should  most  naturally  have 
been  expected — in  our  national  economic  activities. 

Therefore  it  is  depressing  to  find  that  in  an  ultra-industrial 
nation  which  prides  itself  upon  its  common  sense,  patriotism  and 
directness  of  thought  and  action — worshiping  efficiency  so 
highly  as  to  maintain  an  entire  profession  of  "efficiency-engi- 
neers"— our  national  showing  of  mere  thoroughness  of  organiza- 


WEALTH,    INTEREST  AND  AGGREGATE   COMMERCIALISM      473 

tion  (accepting  the  material  to  be  organized,  whatever  it  may 
have  been,  as  the  best  obtainable)  has  been  a  drop  from  the 
already  crude  figure  of  80  per  cent,  for  the  very  crude  era  of 
1850,  to  the  unspeakable  figure  of  50  per  cent  or  less  in  this  year 
of  super-scientific  and  technical  refinement,  1917! 

These  economic  facts  are  bad  enough  in  themselves,  even 
when  regarded  as  showing  merely  so  much  pecuniary  or  material 
loss;  but  in  their  subsequent  ethical  results  they  are  (as  we 
cannot  emphasize  too  frequently)  far  worse.  For  all  "business," 
when  examined  in  the  light  of  the  orderly  factory-system,  turns 
out  to  be  merely  economic  anarchy — each  one  doing  as  he 
pleases;  in  the  lack  of  public  restraint  or  organization,  where 
there  should  be  the  restraint  of  unitary  organization  upon  each ; 
and  the  ultimate  fruits  of  anarchy  are  always  individual  im- 
morality and  social  turbulence.  The  ideas  now  known  as  bol- 
shevism  are  being  manufactured,  quite  subconsciously,  under 
every  business-sign  now  displayed  in  America. 

Yet  the  obvious  remedy  for  economic  and  for  political  anarchy 
alike  is  not  exhortative  moral  regeneration.  Still  less  does  it  lie 
in  stupid  repression  by  force.  It  lies  merely  in  the  exercise  of 
a  little  horse-sense,  coupled  with  a  bit  of  patriotism,  in  getting 
together  with  one's  neighbors — with  the  hundred  million  Ulti- 
mate Consumers — where  hitherto  has  been  aloofness.  Here  is 
an  opportunity  indeed  for  our  patriots  who  possess  leisure  and 
administrative  ability ! 

The  Author's  Personal  Estimates. — If  the  author's  personal 
estimate  of  aggregate  commercial  wages  and  salaries,  "Total  p" 
derived  from  the  basic  classification  of  Tables  27  and  28,  be 
substituted  for  the  bald  classification  itself,  in  the  same  line  of 
argument  as  that  which  resulted  in  Tables  43,  44  and  45,  there 
result  Tables  46  and  47.  In  making  this  use  of  "Total  p"  the 
"Grand  Total"  of  industro-commercial  energy  has  been  taken 
from  Table  44  without  change,  and  all  of  it  except  p  and  "in- 
terest" regarded  as  productive. 

Unimportance  of  the  Personal  Factor.— It  is  plain  from  the 
similarity  between  these  two  sets  of  figures  that  the  arbitrary 
choice  of  factors  which  characterized  the  compositon  of  "Total  p" 
departing  considerably  as  it  does  from  the  rigid  classification  of 
Tables  27  and  28,  in  an  attempt  to  attain  the  furthest  possible 
degree  of  fairness  and  accuracy,  results  in  a  statistical  showing 
not  appreciably  different  from  the  earlier  analysis,  except  to 


474 


MODERN   ECONOMIC   TENDENCIES 


emphasize  the  rapidity  of  growth  of  active  commercial  militar- 
ism. These  later  estimates  of  Tables  46  and  47  show  a  slightly 
smaller  percentage  of  commercialism  than  Tables  43  to  45  in 
the  earlier  decades,  it  is  true ;  but  they  also  show  this  originally 
smaller  percentage  as  growing  very  much  more  rapidly,  over- 
taking or  surpassing  the  proportions  shown  in  Table  44  by  the 
year  1920. 

TABLE  46 
EXPANSION  OP  COMMERCIALISM,  AUTHOR'S  ESTIMATE 


1850 

1860 

1870 

1880 

1890 

1900 

1910 

1920 

Grand  Total 

138.03 

177.28 

196.63 

228.80 

258.51 

283  .  42 

368  .  95 

(454) 

Total  

5.35 
18.48 

8.03 
30.84 

11.36 
37.44 

15.46 
52.20 

27.46 
62.16 

33.66 
69.90 

54.96 
108.18 

(91) 
(147) 

Interest    

Total  Commercial  

23.83 
114.20 

38.87 
138.41 

48.80 
147.83 

67.66 
161.14 

89.62 
168.89 

103.56 
179.86 

163.14 
205.81 

(238) 
(216) 

Net  Production  

PERCENTAGES  OF  GRAND  TOTAL,  OR  THE  DILUTION  OP  THE  CONSUMER'S  DOLLAB 


Net  Production  (cents)  .  .  . 
Commercialism  (cents)  .  .  . 

82.7 
17.3 

78.0 
22.0 

75.1 
24.9 

70.4 
29.6 

65.3 
34.7 

63.4 
36.6 

55.8 
44.2 

47.5 
52.5 

TABLE  47 

RELATIVE  GROWTHS,  AUTHOR'S  ESTIMATE  OP  COMMERCIALISM 
(Based  upon  Table  46,  1850  =  100) 


1850 

1860 

1870 

1880 

1890 

1900 

1910 

1920 

Net  Production  

100 

94} 

91 

85 

79 

76i 

67J 

57J 

100 

127 

144 

171 

200 

211 

255 

332 

Thus,  whereas  Table  44  shows  the  absolute  quantity  of  com- 
mercialism per  capita  of  population  as  having  grown  by  837 
per  cent  in  the  seventy  years,  Table  46  puts  it  at  998  per  cent. 
Whereas  Table  44  shows  the  absolute  loss  in  commercial  wages 
and  salaries  as  growing  by  924  per  cent,  Table  46  puts  it  at 
1700  per  cent. 

Obviously,  however  judgment  may  differ  as  to  the  details  of 
the  classification  of  Tables  27  and  28,  there  cannot  possibly  be 
any  appreciable  difference  as  to  the  ultimate  general  conclu- 
sion enforced  thereby — as  to  the  continuous,  extremely  rapid 
and  recently  accelerated  growth  of  commercialism,  and  of  its 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      475 


detriment  to  the  interest  of  the  Consumer.  If  only  the  start 
may  once  be  made  from  the  viewpoint  of  the  Ultimate  Con- 
sumer, with  his  life-support  as  the  true  goal,  and  with  at  least 
the  familiar  factory-system  as  our  highest  ideal  of  what  should 
be  the  most  efficient  form  of  organization  for  reaching  that 
goal,  then  these  startling  conclusions  become  inevitable. 

Graphs  of  our  Economic  Evolution. — In  order  to  make 
clearer  the  facts  recorded  in  these  various  tables  of  statistics 


t85o 


1860 


1870 


1880 


1890 


1900 


1910 


1920 


FIG.  3.     DECLINE  IN  NATIONAL  ECONOMIC  EFFICIENCY 

their  principal  results  are  set  forth  graphically  in  Fig.  3.  In 
Fig.  3  the  constant  height  of  the  rectangle  represents,  as  100 
per  cent,  the  total  economic  energy  put  forth  by  the  nation  at 
any  stated  decade.  The  clear  area  below  represents  that  portion 
of  this  energy  which  went  to  support  the  life  of  the  Ultimate 
Consumer.  The  shaded  area  above  represents  the  author's  esti- 
mate of  the  portion  dissipated  to  waste  in  commercialism.  The 
line  just  below  the  shaded  area  gives  the  proportion  of  commer- 
cialism according  to  a  bald  interpretation  of  Tables  27  and  28. 


476  MODERN   ECONOMIC   TENDENCIES 

Fig.  3  thus  exhibits  graphically  the  central  idea  which  must 
form  the  pivotal  base  about  which  this  and  every  other  economic 
study  must  center ;  for  it  gives,  on  the  one  hand,  the  proportion 
of  what  we  have  actually  gotten  out  of  life  to  what  we  might  have 
had,  with  the  same  skill  and  exertion,  had  we  been  organized 
nationally  upon  the  factory-system.  On  the  other  hand,  it  gives 
that  proportion  of  wasted  economic  energy  which  has  been  mis- 
spent in  destroying  each  other's  happiness  through  combat  over 
ownership-in-industry,  by  all  of  the  many  ingenious  methods 
which  man  has  devised  for  that  purpose,  including  many  of 
whose  workings  he  is  unaware.  It  does  this  in  a  way  far  more 
conservative  than  the  probable  truth. 

Yet  in  one  sense  Fig.  3  does  not  suffice  for  giving  us  an 
adequate  appreciation  of  what  we  have  lost,  for  our  sense  of 
unattained  possibilities  must  always  be  based  upon  that  which 
we  have  actually  enjoyed.  Hypotheses  must  be  founded  upon 
experience.  If  we  are  to  estimate  airy  possibilities  it  must  be 
from  the  solid  actuality  of  past  and  present,  as  a  constant  base 
of  reference. 

Fig.  4  is  based  upon  this  idea.  It  is  derived  from  an  average 
of  the  two  lines  of  Fig.  3.  In  Fig.  4  the  fixed  height  of  the 
lower  rectangle  represents  the  productive  portion  of  our  national 
economic  energy — the  portion  which  actually  did  produce  every- 
thing consumed  and  enjoyed  at  any  given  date.  The  varying 
heights  of  the  top  of  the  diagram  above  this  measures,  in  con- 
trast, the  possible  increase  in  enjoyment,  referred  to  our  actual 
enjoyment  as  a  base,  which  might  just  as  well  have  been  enjoyed 
from  the  appliances,  circumstances,  knowledge  and  energy  of 
that  time,  if  only  we  had  organized  ourselves  nationally  upon  the 
factory-system  from  the  beginning.  Fig.  4  is  merely  Fig.  3  with 
the  percentages  reversed,  yet  it  appeals  more  cogently  to  the  eye. 

But  even  Fig.  4,  while  probably  as  near  to  expressing  mathe- 
matically the  lost  opportunity  for  life  and  growth  as  can  any 
diagram,  is  still  far  short  of  expressing  the  truth.  For,  however 
man  may  accept  the  passing  fate  of  the  hour,  as  to  provision 
for  life,  as  a  standard  not  to  be  questioned  in  too  self-conscious 
a  way,  yet  as  a  matter  of  fact  the  material  basis  for  enjoyment 
of  life  has  not  been  constant,  as  is  assumed  in  Fig.  4.  It  has 
been  growing  steadily  and  rapidly,  in  spite  of  the  steadily  de- 
creasing attention  paid  to  provision  therefor.  Nor  are  we 


WEALTH,    INTEREST  AND   AGGREGATE   COMMERCIALISM      477 


unconscious  of  this  fact.     We  are  altogether  too  fond  of  con- 
gratulating ourselves,  if  not  openly  boasting,  about  it. 

Thus,  taking  our  figures  from  Tables  20  and  24,  and  com- 
paring only  the  years  1850  and  1910,  it  appears  that  the  ma- 
terial supplies  of  life-support  per  capita  have  actually  increased 
in  the  ratios  listed  in  Table  48.  This  table  shows  that  every- 
thing except  pease,  beans  and  rice  have  increased  in  quantity, 


t8£o  1860          1870          1666  1890          ipoo 

Fig.  4.    AMERICA'S  LOST  OPPORTUNITY 


iq  to 


as  much  or  more  than  the  human  organism  could  be  expected  to 
absorb,  as  supplies  of  mere  food.  Indeed,  the  increase  has 
probably  gone  to  export,  purchasing  for  us  increased  supplies 
of  foreign  food  or  manufactures,  rather  than  to  better  feeding 
at  home. 

As  to  the  raw  materials  of  the  technical  arts,  they  have  in- 
creased by  leaps  and  bounds.  The  sole  exception  is  gold;  and 
this  is  a  commodity  so  cheaply  transported  that  the  fact  that 
later  production  has  been  largely  outside  the  United  States 
does  not  affect  appreciably  our  welfare.  In  regard  to  the  sup- 


478 


MODERN   ECONOMIC   TENDENCIES 


plies  of  meats,  poultry  and  eggs,  no  satisfactory  statistics  are 
available  so  far  back  as  1850;  but  Tables  21  and  23  show  that 
since  1880  the  supplies  of  poultry  and  eggs  have  been  increas- 
ing, while  meat  has  held  its  own  in  current  rate  of  supply, 
although  stocks  on  hand  are  dwindling. 

TABLE  48 

INCREASE  IN  MATERIAL  BASIS  FOR  ENJOYMENT,  1850  TO  1910 
(All  quantities  reduced  to  a  per-capita  basis) 


Material 

Ratio 

Material 

Ratio 

Material 

Ratio 

Corn  

1.08 

Sugar 

68 

Coal 

18  02 

Wheat  

1.71 

Potatoes  .  .  . 

08 

Pig-iron 

12  32 

Oats 

1  73 

Hay 

77 

Copper 

187  50 

Pease  and  beans  .  . 

0.50 

Cotton  

.10 

Lead 

5  45 

Rice  

0  81 

Wool 

39 

Gold1 

0  44 

Butter  and  cheese 

1.16 

Tobacco  

1  34 

Silver 

200 

Lumber 

1  41 

1  Produced  in  the  United  States. 

In  addition  to  all  these  staple  raw  commodities  there  is  a 
whole  list,  including  even  such  old  reliables  as  condensed  milk, 
peanuts,  steel  (in  the  sense  of  structural,  railroad  and  similarly 
bulky  sorts),  petroleum,  aluminum  and  cement,  of  which 
virtually  none  at  all  were  available  in  1850.  And  on  top  of 
this,  of  course,  comes  that  interminable  array  of  composite 
articles,  the  result  of  recent  invention  and  manufacture,  for 
which  ratios  of  increase  are  impossible,  because  they  were  not 
even  known  in  1850. 

So,  if  Fig.  4  is  really  to  attempt  to  portray  these  opportunities, 
measured  in  material  bases  for  enjoyment,  which  we  have  been 
missing  since  1850  by  reason  of  our  gradual  desertion  of  the 
factory-system,  expressed  in  terms  of  those  which  we  have 
actually  enjoyed,  then  the  lower  portion  of  Fig.  4,  instead  of 
having  a  horizontal  top,  should  rise  distinctly  and  acceleratingly 
in  height.  Yet,  however  far  this  lower  portion  may  rise,  the 
upper  portion  must  rise  to  over  twice  that  height  by  1920. 

But  as  no  method  for  averaging  the  increase  in  oats  with  that 
in  iron  or  copper  commends  itself  to  the  author  as  practicable, 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      479 

the  design  of  a  diagram  such  as  has  just  been  suggested  will  not 
be  undertaken.  We  have  reached  a  point  where  we  must  cease 
parading  the  accuracy  of  statistics  or  diagrams. 

Yet  only  such  a  diagram  as  that  could  represent  fairly  to  the 
eye  the  staggering  magnitude  of  opportunity  for  life  and  enjoy- 
ment which  was  lost  when  the  early  failures  of  community- 
enterprise,  preceding  1840,  led  to  our  loss  of  faith  in  our 
national  effectiveness,  in  favor  of  reliance  upon  the  most  selfish 
instincts  of  the  individual  for  the  promotion  of  all  industry. 
Our  national  economic  system  is  an  immeasurably  sad  instance 
of  "what  might  have  been." 

Nor  can  any  such  a  diagram  approach  justice  to  the  real  situa- 
tion because  it  portrays  the  national  waste  only  as  if  it  affected 
the  individual  welfare  of  all  citizens  equally,  by  an  even  dis- 
tribution of  its  burdens  over  all.  But  this  is  very  far  from  being 
the  case.  Even  the  richest  have  not  been  fed  to  the  degree  that 
the  poor  have  been  stinted. 

Loss  in  Social  Vitality  Exceeds  that  Measurable  in  Eco- 
nomic Energy. — Then  the  data  upon  which  Figs.  3  and  4  have 
been  built  include  only  those  factors  of  wasted  opportunity  which 
stand  out  glaringly  from  the  statistics  as  to  personal  pre-occupa- 
tion  with  commercialism.  All  the  indirect  economic  and  moral 
factors  which  are  resultant  from  this  statistical  waste,  but  which 
statistics  cannot  reveal,  have  been  omitted.  They  must  be  in- 
ferred. 

Thus  in  Chapter  XI  the  sagging  of  the  volume  of  traffic  below 
normal,  due  to  its  load  of  commercialism,  was  found  to  be  some 
figure  lying  between  70  and  81  per  cent.  Yet  in  Tables  44  and 
45,  and  in  Figs.  3  and  4,  there  is  revealed  only  some  50  per  cent 
of  sag. 

The  discrepancy  is  explicable  as  being  made  up  partly  of 
profits  and  surplus,  which,  with  a  long  list  of  other  factors  men- 
tioned from  time  to  time,  were  necessarily  omitted  from  Tables 
44  and  45,  and  partly  of  the  indirect,  psychological  discourage- 
ment of  the  potential  productivity  of  the  country  by  the  re- 
pressive, combative  activities  of  the  commercialists — for  which 
first-mentioned  result  we  have  no  statistical  measure.  Tables  44 
and  45  measure  only  the  latter — the  energy  visibly  being  dis- 
sipated in  combat,  attributable  to  the  numbers  enlisted  in  com- 
mercial militarism  and  to  their  relatively  superior  energy,  to- 
gether with  their  direct  loot  in  the  form  of  interest  and  divi- 


480  MODERN   ECONOMIC  TENDENCIES 

dends  (but  not  including  profits  and  surplus,  which  is  now  the 
chief  form  of  loot).  The  higher  figure  derived  through  the 
computation  of  Chapter  XI,  on  the  other  hand,  includes  both  of 
these  factors,  namely,  the  indirect  paralysis  of  the  non-com- 
batants as  well  as  the  directly  destructive  energy  of  the  combat- 
ants. 

For  the  shaded  portion  of  Fig.  3  measures  only  the  energy 
abstracted  by  the  presence  of  commercial  combat.  It  tells 
nothing  as  to  what  was  done  with  that  abstracted  energy.  It 
gives  us  no  measure  of  the  degree  to  which  that  abstracted 
energy  was  devoted  to  destroying  some  of  the  good  energy  left 
behind — which  is  always  the  indirect  effect  of  exertion  in  com- 
bat. For  concepts  as  to  this  we  are  forced  to  turn  to  Chapter  XI, 
on  "charging  all  the  traffic  will  bear/'  There  we  find  that  the 
ingrowing  result  of  the  visible  abstraction  of  some  fifty  per  cent 
of  our  economic  energy,  for  expenditure  in  economic  combat, 
resulted  in  the  destruction  of  about  half  of  the  remainder,  leav- 
ing available  for  life-support  only  some  twenty  or  thirty  per  cent 
of  the  original  whole. 

Our  Social  Evolutionary  Air-Brake. — For  the  commercial 
system  may  be  likened  in  its  effect  upon  our  social  progress,  to 
the  air-brake  of  a  railway-train.  The  brake-pump  on  the  loco- 
motive, which  is  the  source  of  all  the  braking-power  for  the 
train,  absorbs  only  a  few  hundredths  of  the  power  of  the  loco- 
motive. Yet  its  effect,  when  applied  through  the  brakes,  is  to 
annul  the  entire  remaining  ninety-odd  per  cent  of  the  loco- 
motive's active  power,  plus  the  inertia  of  the  train  in  addition, 
stalling  the  whole  outfit  while  the  locomotive  still  drives ! 

Thus  the  harm  done  to  society  indirectly,  by  the  application 
of  the  measurable  energy  of  commercialism  to  the  braking  of 
productive  industry,  is  far  greater  than  the  energy  visible  in 
commercialism  itself.  The  resultant  harm  bears  exactly  the 
same  scientific  relation,  and  somewhat  the  same  proportion,  to 
that  originating  energy  of  commercialism,  that  the  power- 
destroying  effect  of  a  railway-brake  bears  to  the  power  employed 
in  applying  that  brake. 

From  this  choice  of  alternatives,  therefore,  between  a  mini- 
mum loss  due  to  direct  commercialism  of  something  over  50  per 
cent,  representing  the  power  absorbed  in  applying  the  com- 
mercial brake,  and  a  maximum  probably  exceeding  80  per  cent, 
as  the  total  economic  energy  killed  by  said  application,  the 


WEALTH,   INTEREST  AND   AGGREGATE   COMMERCIALISM      481 

reader  may  select  whatever  comfort  he  may  be  able  to  find.  In 
either  case  the  situation  is  hideous,  disgraceful  and  menacing. 

Concrete  Applications. — But  there  may  be  some  among  the 
readers — particularly  among  those  practical  men  of  affairs  whose 
attention  the  author  most  earnestly  seeks  to  fix — who  may  wish 
to  make  their  own  estimates,  based  upon  their  own  knowledge 
of  economic  data.  Such  a  man  may  turn  instinctively  to  his 
own  business,  with  the  details  of  which  he  is  familiar.  He  will 
feel  instinctively  that  there  can  be  no  such  a  huge  proportion  as 
that,  of  wasted  to  useful  effort,  in  his  business — and  his  business, 
he  will  feel,  must  be  accepted  as  a  fairly  average  one. 

But  let  such  a  man  figure  carefully.  He  must  remember  that 
his  productive  organization,  whatever  its  line,  handles,  in  the 
form  of  purchased  materials  and  supplies,  large  funds  of 
economic  energy  already  "canned,"  each  with  its  own  quota  of 
wasted  energy  bottled  up  therein  in  the  form  of  price.  Every 
pound  of  coal,  iron,  paint,  etc.,  every  foot  of  gas  and  every 
kilowatt  of  electricity  which  he  buys  as  raw  materials  already 
has  had  embodied  within  it,  before  it  reaches  him,  its  full  allot- 
ment of  costs  of  selling,  advertising,  financing,  etc. 

So  he  must  start  his  accounting  by  deducting  from  his  gross 
costs  all  money  paid  for  materials  and  supplies,  including  in- 
surance, etc.  What  balance  then  remains,  out  of  his  gross 
receipts  from  the  Ultimate  Consumer  of  his  goods,  then  repre- 
sents what  said  Consumer  pays  him  for  that  portion  of  industry 
lying  within  the  confines  of  his  business.  This  is  the  sum  which 
he  must  divide  between  productive  and  commercial  costs  respect- 
ively. 

From  this  net  sum  he  must  next  deduct,  as  commercial  costs, 
the  rent  of  all  site  and  buildings  occupied,  whether  at  the  factory 
or  at  the  city-office,  whether  such  premises  be  owned  by  him  or 
not;  all  salaries  or  part-time  accounts  of  those  who  concern 
themselves  with  tasks  other  than  true  production;  all  interest 
and  dividends  paid;  all  profits  made  and  all  surplus  accumu- 
lated. What  remains  should  check  out  with  the  costs  of  true 
production  visible  in  wages  and  depreciation  of  plant,  including 
superintendence  and  invention;  for  these  alone  are  the  true, 
natural,  factory-system  costs  of  producing  what  he  sells. 

The  proportion  of  this  final  net  cost  of  true  production  to  the 
net  sum  remaining  after  deducting  supplies,  etc.,  will  reveal  to 
him  the  percentage  of  efficiency  of  organization  of  his  own  line 


482  MODERN   ECONOMIC   TENDENCIES X' 

of  work.  Any  businessman  honestly  performing  this  accounting 
will  be  astonished  at  the  result. 

Thus  the  superintendent  of  a  certain  factory  brought  to  the 
author's  attention  a  minor  accessory  in  the  automobile-trade 
which  he  was  producing  in  quantities — finished,  wrapped  and 
packed  for  mailing,  addressed  and  postage  paid — for  12  cents 
each.  Yet  he  was  losing  money  in  selling  these  for  a  dollar  each ! 

Yet  in  this  cost-figure  of  12  cents  had  already  been  included 
all  of  the  raw  materials  and  supplies,  each  item  of  which  already 
comprised  its  own  quota  of  commercial  costs,  probably  equal,  in 
some  cases,  to  the  present  factory  in  proportion.  When  all  these 
have  been  deducted  there  is  but  a  small  part  of  the  12  cents 
left  as  purely  productive  work  performed  within  the  factory  in 
question. 

Yet  all  of  the  remaining  88  cents  of  the  dollar  was  charge- 
able to  commercial  costs  attachable  to  this  less  than  12  cents 
of  productive  costs ;  for  there  were  no  further  productive  changes 
wrought  in  the  article  after  it  was  mailed.  If  the  items  of  raw 
materials  and  factory-supplies  to  be  deducted  from  the  12  cents 
amounted  to  only  half  the  productive  costs  within  the  factory,  or 
4  cents,  that  would  leave  these  productive  costs  (although  even 
then  including  some  "factory-profits")  as  only  8  cents.  Yet  the 
commercial  costs  attached  thereto  amount  to  over  eleven  times 
this  sum! 

While  many  commodities  are  handled  upon  a  smaller  margin 
of  commercial  costs  than  this,  yet  there  are  also  others  which 
exceed  it. 

The  Reader's  Responsibility. — The  reader  may  protest  that 
he  is  not  capable  of  remedying  this  sort  of  inefficiency  of  dis- 
organization in  his  own  business  and  therefore  that  he  is  not 
responsible.  We  are  not  holding  him  responsible  for  our 
national  inefficiency,  nor  for  the  lack  of  national  organization, 
but  for  his  failure  to  denounce  it  publicly,  so  that  all  may  get 
together  to  remedy  what  no  one  alone  can  touch. 

For  it  is  not  the  followers  of  Alexander  Berkman  and  Emma 
Goldman  who  constitute  the  worst,  nor  the  typically  American, 
anarchists;  for  these,  however  wrong  in  conscious  philosophy, 
are  relatively  harmless.  They  talk  much,  but  they  do  little,  in 
the  anarchy  line. 

Instead,  America  is  now  actively  manufacturing,  upon  her 
usual  scale  of  energy,  her  own  peculiar  brand  of  real,  effective 


WEALTH,    INTEREST   AND   AGGREGATE    COMMERCIALISM      483 

anarchy — commercialism,  or  ownership-in-industry.  It  is  true 
anarchy.  It  is  based  upon  the  belief  in  every  American's  right 
to  do  just  as  he  pleases  in  the  economic  world — just  as  he  pleases 
with  the  Consumer's  money — owning  anything  in  sight  which 
may  promise  a  profit  to  him  for  owning  it,  and  holding  it  for 
any  price  which  he  may  extort.  He  is  deaf  to  every  protest  from 
the  Ultimate  Consumer — impatient  of  every  restraint  imposed 
by  law  upon  his  commercial  licentiousness.  He  holds  this  to  be 
a  right  as  sacred  in  his  philosophy  as  the  "right"  to  live  without 
government  appears  to  the  philosophical  anarchist. 

This  simon-pure  American  brand  of  anarchy  is  of  course  un- 
aware of  being  anarchy ;  but  it  is  none  the  less  effective  for  that. 
It  talks  little,  or  not  at  all;  but  it  "does"  the  Consumer  gigan- 
tically, in  both  senses  of  the  word. 

It  accomplishes  a  tremendous  lot  of  real  destruction.  It  is 
apparently  the  source  and  father  of  all  other  brands  of  anarchy, 
American  and  European.  It  is  not  imported.  We  lead  the 
world  in  its  manufacture. 

We  are  creating  here,  more  rapidly  than  any  other  land, 
economic  conditions  which,  whatever  may  be  the  words  in  the 
mouths  of  their  creators,  destroy  riches,  create  poverty,  under- 
mine political  liberty,  dilute  the  purchasing  and  hiring  power 
of  the  Consumer's  dollar,  develop  (as  will  appear  later)  a 
deficit  in  the  normal  demand  for  labor,  and  degrade  every  moral 
fiber  of  the  nation.  Like  every  other  American  enterprise,  this 
home-brand  of  systematic,  active  anarchy  known  as  commercial- 
ism surpasses  everything  European  in  its  magnitude,  daring, 
speed,  power,  and  its  reckless  menace  to  society. 

The  resultant  outcropping  of  a  flood  of  conscious  philosophical 
anarchy  among  the  ignorant,  bred  of  poverty,  high  prices  and 
unemployment,  and  of  pessimism  amongst  the  educated,  is  then 
inevitable.  But  the  really  responsible  source  of  all  this  is  the 
American  business  system — or  lack  of  all  system. 


CHAPTER  XVIII 

INDIRECT  LIGHT  UPON  THE  GROWTH  OF  COMMERCIALISM 

Transportation  and  Communication. — Commercialism  has 
been  shown  by  the  diagrams  and  tables  which  have  preceded,  and 
particularly  by  Figs.  3  and  4,  to  be  a  social  phenomenon  which 
is  fast  approaching  the  critical  point.  In  the  past  all  such 
critical  social  growths  as  this  have  arisen  as  the  unintentional, 
yet  inevitable,  result  of  certain  other  activities  of  society  which 
in  themselves  were  natural  and  wholesome  social  acts,  quite 
devoid  of  obvious  connection  with  the  results  in  question.  Of 
such  causative  activities  the  one  which  stands  out  most  promi- 
nently in  the  present  instance  is  improvement  in  the  arts  of 
transportation  and  communication. 

If  one  gives  to  this  term  "communication"  its  broadest  pos- 
sible significance,  so  as  to  include  appliances  for  printing  and 
display  with  those  for  overcoming  distance,  certainly  our  growth 
in  this  direction  may  be  granted  the  honor  of  being  lord  over  all 
modern  national  and  international  crises.  For  it  is  by  improve- 
ment in  our  means  for  physical  transportation  and  mental  com- 
munication that  men  and  communities  previously  unable  to 
interact  upon  each  other,  because  of  their  mutual  isolation,  are 
first  brought  into  effective  propinquity  or  actual  contact.  Ul- 
timately such  contact  always  leads  to  wholesome  co-operation 
and  mutual  enrichment;  but  its  first  effect  is  always  friction  and 
impact,  usually  finding  vent  in  war  or  revolution. 

The  invention  of  improved  appliances  for  communication  be- 
tween man  and  man  is  one  of  the  most  natural,  innocent  and 
commendable  of  all  human  instincts.  Yet  time  and  again  in 
history  its  first  fruits  have  been  either  some  horrible  war,  or  else 
a  worse  internal  convulsion.  Just  as  our  blundering  first  use  of 
newly  invented  machinery  begets  horrible  accidents,  which 
mutilate  and  kill  human  bodies  in  a  frightful  manner,  so  our 
equally  blundering  use  of  newfound  propinquities  between  man 

484 


INDIRECT  LIGHT   UPON   THE    GROWTH   OF   COMMERCIALISM      485 

and  man,  in  newly  formed  congestions  of  population  or  newly 
forged  links  joining  continents,  begets  social  collisions,  explo- 
sions and  similar  catastrophes  of  a  more  figurative  nature,  yet 
which  maim,  stunt  and  kill  the  minds  and  souls,  as  well  as  the 
bodies,  for  millions  instead  of  dozens,  in  social  crises  the  causes 
of  which  are  more  mysteriously  hidden  than  those  of  the 
proverbial  railway-accident. 

Here  our  investigation  of  the  growth  of  such  communicative 
inventions  need  not  be  confined  to  any  particular  field,  such  as 
transportation  and  communication  in  their  literal  sense,  for 
virtually  all  fields  have  contributed  to  the  close  congregation 
and  vital  interaction  of  man  with  man  here  in  America.  Thus 
all  inventions  in  the  art  of  illumination,  in  the  writing  and 
duplication  of  letters,  in  moving-pictures  and  a  thousand  sim- 
ilar things,  have  all  operated  to  intensify  the  frequency  and  in- 
timacy of  contact  between  man  and  man,  and  his  ability  to  trans- 
mit ideas  promptly  from  one  to  many.  Hence  all  these  have 
directly  fostered  commercial  combat.  For  man's  first  instinctive 
impulse,  upon  meeting  his  fellow,  is  either  to  fight  him  or, 
being  forbidden  that  by  unprofitable  experience,  to  make  money 
out  of  him — which  leads  ultimately  to  the  same  end. 

The  arts  of  printing,  paper-making,  lithography,  photo- 
gravure, etc.,  for  placing  ideas  before  large  numbers  of  people 
with  increasing  speed  and  decreasing  cost,  have  vied  with  the 
increasing  ability  of  railroads,  steamships,  telegraphs,  telephones 
and  wireless  to  bring  those  ideas  promptly  from  the  uttermost 
corners  of  the  earth.  Equally  important  is  the  field  of  prime 
movers,  and  of  the  transfer  and  subdivision  of  power  from  those 
prime  movers  by  electrical  means,  in  bringing  together  armies 
of  men  and  women  in  factories  and  shopping-districts.  From 
the  power-loom  to  the  elevator  and  moving-stairway,  invention 
has  everywhere  been  the  prime  causative  force  in  the  develop- 
ment, by  sheer  congestion,  of  that  most  intricate  situation  known 
as  the  modern  social  problem.  It  has  done  this,  in  essence, 
merely  by  permitting,  or  inviting,  or  enforcing,  a  novel  and  at 
first  misunderstood  propinquity  and  interaction  where  before 
had  prevailed  isolation  and  mutual  independence. 

Invention. — The  history  of  American  inventiveness,  as  ex- 
hibited bv  the  records  of  the  Patent  Office,  is  set  forth  in  Table 
49.  While  not  every  patent,  nor  every  tenth  patent,  necessarily 
represents  a  successful  invention,  yet  the  proportion  of  successes 


486  MODERN   ECONOMIC   TENDENCIES 

to  total  may  be  accepted  as  remaining  constant  from  decade  to 
decade. 

The  first  significant  column  of  Table  49,  Column  3,  shows  how 
tremendously  the  social  factor  of  invention  has  been  growing 
subconsciously  into  our  lives  during  the  last  eighty  years.  In 
1915  the  rate  of  issue  of  patents  per  capita  of  total  population 
per  annum  had  become  almost  sixteen  times  that  of  1840! 

It  is  also  significant  that  the  virtual  beginning  of  the  era  of 
patented  inventions,  1840,  coincides  with  the  virtual  beginning 
of  the  modern  era  of  interest-bearing  securities  (as  noted  in  the 
past  chapter  upon  Credit)  and,  precedes  by  only  a  decade  the 
date  (1850)  which  was  adopted  in  our  statistical  tables  as  the 
beginning  of  modern  commercialism.  Thus  the  period  of  social 
evolution  now  approaching  its  climax  has  been  peculiarly  one, 
in  the  first  place,  of  scientific,  technical  and  inventive  activity. 

It  is  as  an  inevitable  consequence  of  this,  and  not  at  all  as  a 
result  of  any  peculiarities  of  individual  psychology,  that  this 
period  has  also  been  one  of  an  even  more  rapid  and  intensive 
growth  of  commercialism,  with  its  promise  of  an  early  and 
serious  crisis.  Our  present  social  growing-pains  and  spasms, 
inclusive  under  the  blanket-terms  of  strikes,  bombs  and  Bol- 
shevism, are  nothing  more  mysterious,  at  root,  than  a  sociological 
tummy-ache  due  to  undigested  inventions. 

Invention  a  Cumulative  Process. — But  the  production  of  in- 
ventions is  a  cumulative  process.  An  invention  once  made  is 
often  useful  perennially.  Whereas  patents  always  expire  after 
seventeen  years,  inventions  do  not  always  do  so.  Some  become 
obsolete,  it  is  true;  but  most  of  the  successful  ones  come  into 
their  greatest  usefulness  only  after  the  expiration  of  the  patent. 
Hence  the  patent-productivities  shown  in  Column  3  of  the 
table  must  be  imagined  as  steadily  at  work  throughout  the  last 
seventy  years,  piling  invention  upon  invention  at  a  fairly  con- 
stant rate  to  an  ultimately  stupendous  aggregate. 

Column  5  of  Table  49  attempts  to  set  forth  this  rate  of 
accumulation  of  inventions  per  capita.  Whereas  the  rate  of 
production  of  patents  (Column  3)  has  increased  by  10.5  fold 
during  the  sixty-five  years  from  1850  to  1915,  the  resultant 
aggregate  accumulation  has  grown  by  the  enormous  ratio  of 
37.1  fold !  Moreover,  one-half  of  this  gigantic  accumulation 
of  novel  appliances  has  been  accomplished  since  the  Spanish 


INDIRECT   LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM      487 


War  of  1898,  and  one- fifth  of  it  since  Mr.  Wilson  has  been  in 
the  White  House! 

TABLE  49 
GROWTH  OF  INVENTION  (U.  S.  PATENTS),  1840  TO  1915 


Rate  of  Issue  of 

• 

Period 

Patents 

Aggregate 

Product  of  Number 

of 

Patents  in 

of  Patents  by 

Year 

Years 
Averaged 
Together 

Per  Annum 
per 
Million 

Increase 
in  Rate: 
Percentage 

Existence, 
per  100,000 
Inhabitants 

Population:  Index 
Based  upon  Unity 
for  the  Year  1840 

Inhabitants 

per  Annum 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

1840 

1 

28 

.... 

.... 

1 

1850 

1 

43 

4.4 

30 

3 

1860 

5 

126 

11.3 

85 

15 

1870 

5 

350 

10.7 

255 

64 

1880 

5 

305 

-1.4 

445 

94 

1890 

5 

374 

2.1 

665 

180 

1900 

5 

340 

-1.0 

839 

243 

1905 

5 

386 

2.3 

.... 

332 

1910 

5 

389 

0.0 

1026 

403 

1915 

1 

445 

8.0 

1113 

556 

These  facts  are  all  but  incomprehensible.  Yet  it  is  this 
astounding  situation  as  to  invention  which  alone  is  competent 
to  explain  the  marvelous  acceleration  in  the  growth  of  com- 
mercialism which  has  signalized  the  last  few  decades.  Here- 
tofore in  this  book  this  accelerating  growth  of  commercialism 
has  been  noted  merely  as  an  historical  fact.  Now  the  history 
of  invention  offers  an  adequate  explanation  of  that  fact. 

The  rate  of  increase  in  this  American  tendency  to  invent, 
however,  has  not  been  constant  throughout  the  decades.  See 
Column  4.  Two  comparatively  short  periods  of  rapid  advance 
stand  out  conspicuously  beyond  all  others. 

The  first  of  these  periods  extended  from  about  1848  to  about 
1872.  The  second  and  much  less  marked  advance  has  been 
entered  upon  since  these  pages  were  begun.  Whereas  the  mean 
rate  of  increase  in  rate  of  issue  of  patents,  from  1840  down  to 
the  present  time,  has  averaged  only  about  3.8  per  cent  per 


488  MODERN   ECONOMIC   TENDENCIES 

annum  (with  the  corresponding  average  from  1870  to  the 
present  time  only  about  0.5  per  cent),  yet  the  average  rate  of 
growth  in  the  rate  of  issue  maintained  during  the  five  years 
from  1850  to  1855  was  about  20  per  cent  per  annum!  In  the 
single  year  of  1865-66  a  rate  of  growth  of  43  per  cent  was  at- 
tained, followed  by  38  per  cent  again  during  the  succeeding 
year !  Such  is  one  effect  of  war. 

At  no  later  time  has  there  ever  been  any  outburst  of  growth 
in  inventiveness  as  sudden  as  this.  From  1873  to  1914  the 
figures  of  Table  49  (averaged  just  as  they  stand)  come  to  less 
than  one-half  of  one  per  cent  per  annum.  Even  the  present 
acceleration,  so  far  as  recorded  in  1915,  has  amounted  to  only  8 
per  cent  per  annum. 

It  is  plain  that  the  turning  of  the  people  to  patented  invention, 
which  had  been  legal  and  had  been  practiced  upon  a  small  scale 
since  the  eighteenth  century,  did  not  occur  in  any  great  measure 
until  after  1840.  Then  it  took  shape  rapidly,  was  markedly 
accelerated  rather  than  hindered  by  the  Civil  War,  culminated 
to  a  maximum  immediately  after  the  attainment  of  peace,  and 
then  fell  to  a  minimum  again  at  about  the  time  of  the  panic  of 
1873.  Since  then  merely  a  slow  rate  of  growth  in  the  rate  of 
issue  has  prevailed  until  the  present  decade,  which  may  or  may 
not  witness  the  development,  from  the  same  cause  as  that  of 
1865-67 — war — of  a  new  era  of  growth  equal  to  or  greater  than 
the  earlier  one. 

But  the  statistics  of  patents  are  of  the  few  which  should  not 
be  stated  "per  capita/'  Whereas  a  bushel  of  wheat  undergoes 
a  finer  subdivision  of  its  usefulness  as  the  population  relying 
upon  it  increases,  the  usefulness  of  an  invention  actually  in- 
creases with  the  population.  Therefore,  in  order  to  pave  the 
way  for  later  studies  in  this  direction,  the  last  column  of  Table 
49,  giving  the  product  of  patents  and  population,  rather  than 
their  quotient,  is  added. 

Sociological  Lag. — Between  the  date  of  issue  of  a  patent,  as 
a  cause,  and  an  increment  in  commercialism  as  an  effect,  there 
must  exist  considerable  "lag."  It  takes  years  to  develop  and 
market  an  invention,  a  task  often  not  accomplished  until  the 
patent  has  almost  expired,  and  further  years  for  that  invention 
to  exert  its  influence  upon  the  number  and  intricacy  of  com- 
mercial enterprises  in  action.  With  this  lag  remembered,  the 


INDIRECT   LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM      489 


function  of  invention  as  a  stimulator  of  commercialism  is  easily 
seen  in  the  record. 

TABLE  50 

GROWTH  OF  COMMUNICATION  IN  PROPORTION  TO  POPULATION, 
1800  to  1915 


Year 

Post  Office 
(per  Capita) 

Telegraph 
per  1,000 
Inhabs. 

Telephone  per  Thousand 
Inhabitants 

Ordinary 
Stamps  and 
Postal-cards 
Issued 

Gross 

Expendi- 
ture 

Messages 
Per  Annum 

Miles 
of 
Wire 

Number 
of  Instru- 
ments 

Daily 
Messages 

1800 

$0.04 

1810 

0.07 

.... 

.... 

.... 

1820 

0.12 

.... 

.... 

.... 



1830 

.... 

0.15 

.... 

.... 

.... 

1840 

.... 

0.27 

.... 

1850 

0.221 

.... 

.... 

.... 

1860 

7 

0.61 

.... 

.... 



(1867) 
1870 

12 

0*62 

161 
237 







1880 

23 

0.73 

582 

0.68 

1.08 

.... 

1890 

42 

1.05 

888 

3.8 

3.72 

7.2 

1900 

60 

1.41 

1902 

.... 

909 

63.6 

30.35 

66^4 

1905 

77 

2.00 

.... 

.... 

1907 

.... 

859 

137 

56.3 

327 

1910 

106 

2~50 

1912 
1915 

121 

2.95 

(942) 

199 

76.6 

393 

1  The  custom  of  prepaying  postage  came  in  only  about  1850,  with  a 
considerable  drop  in  rates.  Note  the  birth  of  activity  in  the  figures 
for  1840,  the  year  which  seems  assignable  as  the  birth-year  of  commercial- 
ism in  its  modern  sense.  Note  also,  in  the  lower  lines  of  the  table,  the 
marked  acceleration  of  all  data  in  terms  of  time. 

Communication  of  Messages. — Of  all  the  results  of  inven- 
tion, none — possibly  excepting  the  railroad  and  the  steamship — 
have  had  greater  influence  in  stimulating  the  growth  of  com- 
mercialism than  the  facilities  for  the  transmission  of  messages, 
whether  by  mail,  telegraph  or  telephone.  Table  50  shows  sta- 


490  MODERN  ECONOMIC  TENDENCIES 

tistically  the  increase  in  these  facilities,  and  in  the  use  of  them, 
in  proportion  to  the  population.  The  figures  for  the  telegraph 
are  from  one  company  only,  it  being  necessary  to  assume  that 
they  are  probably  proportional  to  the  total  for  all  companies. 
Yet  the  falsity  of  this  assumption  is  plainly  visible  after  1890. 

The  wonderful  growth  into  our  daily  lives  and  habits  of 
thought  of  these  facilities  for  the  transmission  of  messages  can 
scarcely  be  indicated  by  statistics.  To  say  that  we  now  use 
fifteen  times  the  volume  of  postal  facilities  per  capita,  as  com- 
pared with  what  we  did  in  1850,  with  all  our  telegraphic  and 
telephonic  facilities  in  addition,  means  little.  The  human 
energy  now  currently  absorbed  merely  in  communicating  our 
thoughts  to  one  another  is  marvelous.  Yet  the  energy  released 
by  the  act  is  far  greater  still — quite  beyond  our  comprehen- 
sion, in  fact.  For  the  social  energy  released  by  the  investment 
of  a  given  amount  of  exertion  in  the  maintenance  of  free  com- 
munication of  ideas  is  in  about  the  same  proportion  that  the 
mechanical  energy  released  through  the  wheels  of  a  locomotive 
bears  to  the  muscular  effort  involved  in  feeding  the  coal  into 
its  furnace. 

Between  the  years  1907  and  1916  the  Bell  Telephone  Com- 
pany alone  is  reported  as  having  invested,  in  the  mere  extension 
of  its  facilities,  twice  the  cost  of  the  Panama  Canal.  Yet  the 
Canal  itself  is  a  new  means  of  communication  which  is  by  no 
means  negligible  in  its  importance  for  the  promotion  of  world- 
commercialism — yet  one  which  does  not  appear  in  our  statistics. 
According  to  the  telephone-people,  this  nation  in  1915,  then  hav- 
ing only  six  per  cent  of  the  world's  population,  maintained  in 
use  fifty-four  per  cent  of  its  total  equipment  with  telephones; 
and  America  is  the  most  commercial  country  in  the  world. 

Newspapers  and  Periodicals. — In  general,  the  evolution  of 
the  newspaper  or  periodical  in  American  history  has  been  not 
merely  one  of  quantity,  but  primarily  one  of  form  and  function. 
The  publications  with  which  we  are  now  familiar  as  newspapers 
or  periodicals  would  scarcely  be  recognized  as  such,  if  we  could 
submit  them  to  the  public  of  a  century  ago. 

For  the  newspaper  of  the  period  from  colonial  to  nearly  Civil 
War  days  was  purely  what  its  name  indicated :  a  sheet  printed 
and  circulated  almost  wholly  for  informing  or  entertaining  the 
subscriber,  by  whom  the  bulk  of  its  cost  was  contributed  directly. 
The  result  of  this  policy  was  a  real  profession  of  journalism, 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      491 

exemplified  by  the  great  dailies  and  journalists  of  the  mid- 
victorian  period.  These  personalities  were  a  daily  guide  to 
millions,  and  a  real  force  in  the  conduct  of  our  national  life. 

Commercialism  and  Journalism. — But  to-day  this  aspect  of 
our  current  publications  has  altered  so  completely  as  to  be  vir- 
tually gone.  The  newspaper  or  magazine  of  to-day  exists 
primarily  for  the  purpose  of  advertising.  It  is  supported  mainly 
by  its  advertisers,  and  it  is  therefore  controlled  in  its  editorial 
policies  almost  exclusively  by  the  selfish  interests  of  its  adver- 
tisers. 

Advertisers,  of  course,  cannot  be  had  without  subscribers ;  but 
the  latter  are  secondary  and  the  former  primary,  both  in  the 
support  and  in  the  control  of  the  modern  sheet.  The  subscribers 
play  the  same  sort  of  a  second-fiddle  role  to  the  advertisers  that 
the  Consumers  do,  in  general,  to  the  stockholders  in  other  enter- 
prises. In  neither  case  can  they  be  dropped  from  the  orchestra, 
but  in  neither  case  do  they  lead. 

The  horde  of  new  and  increasingly  superficial  periodicals 
constantly  appearing  is  stimulated  into  existence  only  by  the 
increasingly  profitable  business  of  advertising.  In  each  case, 
of  course,  the  thing  rests  upon  the  Ultimate  Consumer  or  sub- 
scriber for  its  support,  just  as  does  our  maze  of  duplicated  shops, 
our  dirty  streets,  our  crowded  cars  and  our  bizarre  waste  of  light 
in  electric  signs,  none  of  which  the  Ultimate  Consumer  desires. 
But  in  each  case  the  appropriation  of  the  money  collected  from 
the  Ultimate  Consumer  for  these  things  is  determined,  not  by 
the  source  of  the  money,  but  by  the  agency  for  its  collection. 

The  political  hue  or  literary  standards  of  each  of  the  weeklies, 
dailies  and  monthlies,  great  or  small,  is  no  longer  the  expression 
of  a  single  man  of  genius,  supported  by  a  clientele  of  public 
opinion,  as  was  the  case  two  generations  ago,  but  that  of  an 
unimaginative  board  of  directors,  the  coldblooded  machinations 
of  which  are  guided  solely  by  its  commercial  relations  with  its 
advertisers.  Journalism  has  long  ceased  to  be  a  manifestation 
of  either  taste  or  intellect,  whether  that  of  the  editor  or  of  the 
subscribers,  and  has  ceased  to  be  a  pure  profession.  Instead,  it 
has  become  merely  one  subordinate  department  of  our  greatest 
American  national  institution — commercialism. 

In  the  earlier  periods  of  journalism  the  subscriber  paid  his 
money  directly  to  the  periodical;  he  paid  it  for  journalism; 
consequently  he  received  journalism.  But  to-day  he  pays  his 


492  MODERN   ECONOMIC   TENDENCIES 

money  most  indirectly.  It  goes  first  across  the  shop-counter  of 
the  retail  merchant — ostensibly  as  a  part  of  the  inevitable  cost 
of  dry-goods  or  the  like,  but  in  reality  for  advertising;  and  the 
advertising,  we  have  seen,  becomes  necessary  only  because  we 
allow  a  number  of  merchants  to  duplicate  each  others'  efforts  in 
parallel — as  no  manager  of  any  factory  ever  permits — where 
there  should  be  but  one  merchant. 

Thus  the  money  travels  from  its  original  source,  the  Ultimate 
Consumer,  to  the  periodical  through  the  agency  of  the  advertiser. 
Therefore  it  reaches  the  periodical  not  as  an  expression  of  the 
literary  or  political  desires  of  the  subscriber,  nor  even  those  of 
the  Ultimate  Consumer  of  the  thing  advertised,  but  solely  of  the 
commercial  desires  of  the  advertiser,  who  neither  consumes  the 
goods  advertised  nor  reads  the  periodical's  occasional  columns  of 
text.  And  the  advertiser's  desires  are  neither  individual  nor 
national  nor  literary  life,  but  cold,  private  profits. 

Automatic  Involuntariness  again. — Here  we  have  another 
instance,  similar  to  that  of  the  messenger-boys  in  Chapter  VII, 
of  the  complete  reversal  of  the  economic,  ethical,  political  and 
moral  effect  of  the  expenditure  of  a  given  amount  of  money,  by 
a  people  of  given  moral  and  patriotic  standards,  merely  because 
of  the  peculiar  form  of  organization  chosen  for  the  transmission 
of  the  popular  will.  There  need  be  no  argument  that  the 
modern  newspaper  has  lost  its  influence,  nor  that  it  is  personally 
venal.  Its  transformation  and  degradation  has  consisted  merely 
in  its  having  abandoned  its  proper  role  of  expressing  the  sub- 
scribers' tastes  for  that  of  cat's-paw  for  its  advertising  patrons. 

The  demagogue  or  muckraker  is  daily  urging  that  the  news- 
papers are  "sold,  body  and  soul"  to  certain  "interests."  The 
editors  thereof,  innocent  of  bribery,  are  as  frequently  repelling 
the  charge  with  scorn.  But  both  sides  are  right.  The  editors  are 
innocent  of  crass  bribery,  it  is  true;  but  they  are  guilty  of  an 
offense  equally  destructive  to  the  fiber  of  the  nation,  however 
lacking  recognition  in  the  penal  code,  namely,  that  of  accepting 
a  salary  from  a  board  of  directors  which  is  paid  through  profits 
earned  by  advertising. 

They  may  be  personally  helpless  to  alter  this  evil  system,  as  a 
whole;  but  their  first  professional  duty  is  to  insist  upon  con- 
demning it  publicly,  at  their  every  opportunity.  The  least  they 
can  do  is  to  maintain  toward  hired,  constrained  journalism  the 
same  attitude  that  the  medical  profession  maintains  toward 


INDIRECT  LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM      493 

quackery  and  proprietary  medicine,  or  which  the  bar  maintains 
toward  venal  practice  of  the  law.  The  editor  who  prints  paid 
advertisements  under  th,e  same  cover  which  he  sells  to  the  sub- 
scriber as  reading-matter  should  not  be  admitted  to  membership 
in  any  professional  organization,  nor  to  any  gentleman's  social 
club. 

For  the  failure  of  the  journalists,  as  a  professional  body,  to 
maintain  this  attitude  of  self-respect  stands  as  one  of  the  worst 
of  our  many  locked-down  safety-valves  of  public  opinion  which 
to-day  are  inviting  the  inevitable  boiler-explosion.  When  the 
point  has  been  reached,  as  to-day,  where  one  man,  not  by  reason 
of  his  journalistic  ability,  but  through  his  subserviency  to  his 
advertising  patrons,  controls  absolutely  the  editorial  policy  of 
daily  journals  having  an  aggregate  circulation  of  over  two 
millions,  with  magazines  of  a  like  total  monthly  circulation — 
and  when  that  man,  as  now,  inevitably  happens  to  be  con- 
spicuously lacking  in  patriotic  vision — then  it  is  high  time  for 
the  lover  of  liberty  to  take  alarm  over  the  control  of  our  national 
ethics  by  a  reckless  economic  autocracy.  , 

Modern  Muzzling  of  Free  Speech. — But  let  any  man  or 
society  start  out  to  oppose  these  selfish  interests,  whether  of  the 
individually  owned  editorial  policy  of  any  journal  or  of  the 
unorganized  group  of  advertisers  back  of  the  same,  and  it  will 
soon  appear  wherein  lies  the  real  power  of  directing  modern 
public  opinion.  The  reformer  will  find  himself  as  impotent  to 
give  adequate  expression  to  his  views  as  was  every  liberal  thinker 
in  Europe  during  the  eighteenth  and  nineteenth  centuries,  when 
political  liberty  did  not  even  pretend  to  exist,  and  the  rigid 
muzzling  of  the  press  by  arbitrary  authority  was  accepted  without 
question. 

In  those  days  the  inevitable  result  of  the  restriction  of  free 
speech  was  the  fostering  of  as  unjust  a  political  autocracy  as 
history  has  ever  recorded.  It  was  only  as  a  secondary  reaction 
against  this  autocracy  that  the  periodic  conscious  revolutionary 
outbreaks  occurred.  The  primary  and  subconscious  and  therefore 
inevitable,  fruits  of  this  systematic  repression  of  free  speech  we 
are  now  enjoying,  in  the  Great  War  of  1914. 

To-day  we  shall  find  that  the  laws  of  social  evolution  have  not 
changed.  To-day  a  muzzled  press  is  fostering  an  unjust,  oppress- 
ive autocracy  in  America  as  surely  as  it  did  a  century  ago  in 
Europe.  To-day  we  need  to  learn  that  political  liberty  is  all  but 


494  MODERN   ECONOMIC  TENDENCIES 

impotent  and  valueless  without  economic  liberty,  and  that  neither 
can  be  had  without  an  absolutely  untrammeled  journalism. 

History  of  Journalism. — The  first  half-century  of  our 
national  existence  witnessed  a  progress  in  periodical  literature 
which  lay  merely  in  the  number,  size  and  circulation  of  publica- 
tions. During  this  period  periodicals  exerted  a  very  real  and 
growing  influence  for  national  solidarity,  which  had  much  to  do 
with  guiding,  or  even  enforcing,  the  political  acts  of  that  day. 

This  period  was  one  of  a  gradual  consolidation  and  cementa- 
tion of  the  nation,  from  the  amorphous  condition  of  the  thirteen 
colonies  immediately  after  independence  had  been  won — separate 
"sovereign"  states  enslaved  by  their  mutual  jealousies,  too  loose 
and  too  lifeless  even  to  adopt  a  federal  constitution,  until  com- 
pelled by  internal  disorders  to  do  so — to  that  of  Gettysburg  and 
Appomattox,  when  stress  had  proven  that  a  unified  national 
government,  of,  for  and  by  the  people,  could  indeed  exist  and 
coerce.  The  history  of  this  time  was  not  merely  the  result  of  the 
invention  of  facilities  for  communication  in  the  freight-train 
sense  of  the  cotton-gin,  the  steamboat  and  the  railway,  although 
these  purely  mechanical  forces  constituted  a  factor  in  the  control 
of  our  destinies  which  has  been  too  commonly  overlooked.  It  was 
also  communication  in  the  mail-car  sense  of  acquainting  New 
England  with  Minnesota  and  Louisiana,  through  the  medium  of 
better  and  cheaper  paper,  clearer  type  and  faster  presses,  as 
well  as  of  quicker  transportation,  which  guided  the  procession 
of  national  events. 

Yet  all  this  earlier  growth  of  journalism  was  virtually  free 
from  commercialism.  The  period  of  the  latter's  appearance  in 
this  field  may  be  dated  from  the  inception  of  the  penny-paper — 
the  paper  which  relied  upon  low  price,  rather  than  upon  literary 
or  informative  merit,  to  increase  its  circulation,  and  then  upon 
the  advertising  made  possible  ~by  this  circulation  for  its  main 
income — thus  misleading  both  the  subscriber  and  the  Ultimate 
Consumer  as  to  the  real  price  of  the  paper,  and  the  real  source 
of  its  editorial  views,  and  blocking  or  distorting  the  true  expres- 
sion of  their  desires. 

The  first  penny-paper  of  magnitude  was  the  New  York  Sun, 
appearing  in  1833.  The  United  States  census-report  for  1880 
(Vol.  8,  page  89)  quotes  Mr.  Day,  the  founder  of  the  Sun, 
as  saying  at  a  banquet  in  1851 : 


INDIRECT   LIGHT   UPON  THE   GROWTH   OF   COMMERCIALISM      495 

"It  is  true  that  I  originated  the  Sun,  the  first  penny-paper 
in  America,  and,  as  far  as  I  have  known,  the  first  in  the 
world;  ...  I  issued  the  first  number  of  the  Sun  September 
3rd,  1833.  ...  At  the  end  of  three  years  the  difficulty  of 
striking  off  the  large  edition  on  a  double-cylinder  press  in  the 
time  usually  allowed  to  daily  newspapers  was  very  great.  At 
that  time  all  the  Napier  presses  in  the  city  were  turned  by 
crank-men.  In  1835  I  introduced  steam-power,  now  so  neces- 
sary an  appendage  to  almost  every  newspaper-office.  .  .  .  But 
even  this  great  aid  to  the  speed  of  the  Napier  machines  did 
not  keep  up  with  the  increasing  circulation  of  the  Sun." 

The  remarkable  rapidity  of  growth  in  consumption  of  period- 
ical literature  per  capita,  throughout  our  entire  history  as  well 
as  merely  that  resultant  from  the  adoption  of  this  policy,  is 
shown  in  Table  51.  But  this  growth,  in  spite  of  the  per-capita 
figures,  has  by  no  means  been  spread  evenly  over  the  entire  pop- 
ulation. As  the  center  of  population  has  moved  westwardly 
from  Baltimore,  where  it  lay  in  1790,  almost  exactly  upon  a 
parallel  of  latitude,  the  chief  field  for  periodical  literature  has 
remained  to  the  northward  of  that  line,  and  has  moved  parallel 
with  it.  New  England  first,  and  after  that  the  northern  Middle 
West,  settled  largely  by  New  Englanders,  has  been  the  natural 
habitat  of  publication.  Virginia  and  her  neighbors  took  from 
the  start  almost  as  strong  a  stand  against  the  introduction  of  the 
printing-press  as  New  England  did  in  its  favor. 

The  United  States  census  for  1905  (Special  Reports:  "Manu- 
factures," Part  III,  page  742)  says  of  Massachusetts,  New  York, 
Pennsylvania,  Michigan,  Ohio,  Indiana,  Illinois,  Missouri,  Min- 
nesota and  California: 

"The  ten  states  which  proved  to  be  the  largest  producers  of 
daily  circulation  in  1905  have  contributed  practically  the  same 
proportion  of  the  total  circulation  since  1850." 

The  growth  set  forth  in  Table  51  has  been  fairly  steady  and 
very  rapid,  averaging  9.2  per  cent  per  decade  for  number  of 
publications,  and  33  per  cent  per  decade  for  number  of  copies,  per 
inhabitant,  over  the  entire  century.  The  columns  of  percentages 
of  growth  show,  by  the  irregularities  at  1880,  what  is  probably 
some  discrepancy  in  classification.  The  growth  in  number  of 
publications  is  unusually  high  for  this  decade,  while  that  of 


496 


MODERN  ECONOMIC  TENDENCIES 


total  copies  is  unusually  low,  the  average  being  made  up  by  the 
unusually  high  figure  for  the  following  decade. 

But  otherwise  the  figures  are  concordant.  The  rapid  increase 
around  1840-50  may  indicate  the  effect  of  the  introduction  of 
the  big-circulation,  advertising  type  of  sheet  in  1833,  as  just 
noted.  The  reaction  between  1905  and  1910  is  doubtless  due  to 
the  panic  of  1907,  which  would  affect  deeply  a  community  of 
periodicals  which  had  grown  up  on  the  artificial  stimulus  of 
advertising. 

TABLE  51 
GROWTH  OF  PERIODICAL  LITERATURE,  1790  TO  1910 


Year 

Number  of 
Publications 
per 

Total  Copies 
per  Inhabitant 

Percentages  of  Growth 
per  Decade 

Million 
Inhabitants 

per 
Annum2 

Publications 

Circulation 

1790 

26 

1810 

49 

3.8 

44 

.... 

1828 

70 

5.9 

24 

30 

1840 

95 

13.8 

30 

112 

1850 

109 

21.8 

15 

50 

1860 

129 

29.5 

18 

35 

1870 

152 

39.1 

18 

33 

1880 

225 

41.2 

48 

5 

1890 

237 

74.2 

5 

85 

1900 

239 

103.0 

1 

39 

1905 

255 

123.3 

13 

39 

1910 

241 

125.8 

-12 

4 

1915 

229 

158.5 

-10 

52 

2  Before  the  Civil  War  the  figures  refer  to  white  population  only. 

That  the  general  change  described  above  has  not  been  due  to 
any  general  alteration  in  public  taste  is  visible  from  the  steadi- 
ness with  which  the  relative  proportions  between  dailies,  weeklies 
and  monthlies  have  held  respectively  throughout  the  one  hundred 
any  twenty  years  from  1790  to  1910,  as  shown  in  Table  52.  The 
relative  decline  of  the  weekly  since  1880  is  probably  due  to  the 
fact  that  previously  to  that  date  the  weekly  formed  the  popular 
reliance  for  a  news-sheet,  whereas  since  then  the  daily  has  become 
more  accessible  to  the  rural  districts  while  the  weekly  has 


INDIRECT   LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM      497 


become  more  purely  a  review.  But  this  statement  applies,  ap- 
parently, more  to  the  number  than  to  the  aggregate  circulation 
of  the  two  sorts  of  journal. 

TABLE  52 

PERIODICALS — HISTORICAL  PROPORTIONS  BETWEEN  CLASSES, 
1790  TO   1910  (Percentages) 


Number  of  Publications 

Aggregate  Circulation 

Year 

Daily 

Weekly 

Monthly 

Others 

Daily 

Weekly 

Monthly 

All 
Others 

1790 

7.8 

68.9 

5.8 

17.5 

1850 

10.1 

75*3 

4.0 

10.6 

55.6 

35.9 

0.2 

8.3 

1860 

10.0 

78.3 

6.9 

4.8 

49.9 

42.5 

0.4 

7.2 

1870 

9.8 

73.2 

10.6 

6.4 

54.0 

36.5 

0.4 

9.1 

1880 

8.6 

76.3 

10.3 

4.8 

54.0 

40.9 

0.5 

4.6 

1890 

12.8 

71.6 

11.6 

5.0 

56.2 

32.2 

0.5 

11.1 

1900 

12.2 

71.2 

10.0 

6.6 

60.1 

22.7 

0.6 

16.6 

1905 

11.5 

70.3 

11.7 

6.5 

63.9 

18.5 

0.7 

16.9 

1910 

11.7 

68.2 

11.2 

8.9 

65.6 

18.4 

0.6 

15.4 

"Boiler-Plate"  Journalism. — The  prostitution  of  journalism 
to  advertising-purposes  was  much  aided  by  the  introduction  of 
the  practice  of  using  "patent  insides,"  or  "boiler-plate,"  for  the 
reading-matter  of  many  newspapers — the  slang  terms  referring 
to  the  practice  of  making  up  at  some  central  city-bureau  copy 
which  would  be  of  interest  to  the  general  public,  setting  it  up  and 
stereotyping  it,  and  then  selling  the  plates  or  the  printed  pages 
bodily  to  large  numbers  of  subscribing  newspapers  scattered 
about  the  country.  These  newspapers  then  inserted  these  pages 
along  with  others  containing  local  news. 

The  scheme  was  started  in  Milwaukee  in  1864,  and  during  the 
next  sixteen  years,  according  to  the  census-report  for  1880, 
spread  chiefly  over  Illinois,  Iowa,  Ohio  and  New  York.  It  then 
covered  a  subscrMion-lLt  of  3238  newspapers,  almost  entirely 
weeklies. 

The  plan  is  praised  in  the  census-report  as  a  commendable 
instance  of  "co-operation"  in  the  printing  of  periodicals.  With- 
out asserting  that  it  contains  no  germ  of  value,  certainly  its  use 


498 


MODERN   ECONOMIC   TENDENCIES 


in  connection  with  advertising-sheets  exaggerated  journalism's 
worst  evil,  forming  one  of  the  very  worst  of  the  many  bad 
economic  enterprises  which  have  masqueraded  under  the  much 
abused  term  co-operation. 

Growth  of  Advertising. — As  to  the  rate  of  growth  of  adver- 
tising itself,  this  is  a  topic  worthy  of  the  best  corps  of  statisticians 
available  in  the  land.  No  single  investigator,  nor  any  few  pages 
in  a  general  treatise  such  as  this,  can  begin  to  do  it  justice.  That 
advertising  has  grown  tremendously  as  a  national  feature  needs 
no  statistics  for  its  proof.  But  to  reduce  its  growth  to  statistical 
measure  would  require  the  efforts  of  an  entire  census-bureau 
corps.  The  data  given  in  Tables  53  and  54,  drawn  from  census- 
reports,  are  submitted  as  mere  flashlights  upon  a  gigantic  topic. 

TABLE  53 
GROWTH  OP  ADVERTISING  IN  PERIODICALS,  1863  TO  1910 


Proportion  of  Total  Income 

Cost  of  Advertising  in 

Year 

Drawn  from  Advertising, 

Periodicals:  Per  Capita 

Per  Cent 

of  Population  per  Annum  3 

1863 

$0.04 

1864 

.  . 

0.13 

1865 

.  . 

0.22 

1866 

0.27 

1867 

•• 

0.26 

1880 

44 

0.78 

1890 

49 

1.13 

1900 

54 

1.26 

1905 

57 

1.79 

1910 

60 

2.20 

3  This  is  the  cost  at  the  newspaper  office — what  might  be  called  the 
wholesale  price.  The  cost  at  the  consumer,  after  passing  through  the 
hands  of  the  sellers  of  advertising  and  through  the  books  of  the  advertiser, 
where  is  inevitably  added  a  profit  upon  every  cost  of  doing  business, 
must  have  been  considerably  greater. 

Charging  Literature  All  the  Traffic  will  Bear.— The  un- 
usual rate  of  acceleration  of  advertising  which  began  in  1864  is 
merely  another  item  of  proof,  among  many,  of  the  marked  out- 
burst of  commercial  prosperity  which  appeared  in  that  year. 
Since  then  the  space  given  up  to  advertising  has  increased  even 


INDIRECT   LIGHT   UPON   THE    GROWTH    OF   COMMERCIALISM      499 

more  rapidly  than  the  cost,  because  of  the  decreased  cost  of 
printing  per  unit  of  area.  While  pecuniary  cost  to  the  reader  is 
the  main  issue  in  this  analysis,  yet  also  to  be  considered  is  the 
clumsy  burden  forced  upon  him  in  the  inevitable  handling  of 
all  this  undesired  advertising-space,  when  he  desires  only  news — 
a  feature  of  no  mean  detriment  to  a  civilization  making  the 
claims  to  efficiency  which  our  present  one  does,  nor  in  one  in 
which  a  paper-famine  threatens. 

The  census  for  1880  gives  some  figures  as  to  the  advertising- 
space  in  certain  New  York  dailies  for  that  year,  which  are  repro- 
duced here  in  the  first  line  of  Table  54.  To  this  is  appended,  in 
contrast,  similar  figures  taken  from  unselected  issues  for  the 
years  1913-16.  The  growth  is  startling.  It  should  be  noted, 
incidentally,  that  the  decrease  in  absolute  amount  of  advertising 
in  1916,  as  compared  with  1913  and  1915,  does  not  necessarily 
signify  a  decrease  in  commercialism,  since  the  proportion  of 
advertising  to  total  space  remained  about  the  same. 

The  year  1916  was  one  of  a  peculiar  form  of  commercial  pros- 
perity, due  almost  entirely  to  war-orders.  Not  only  did  print- 
paper  become  both  scarce  and  costly,  but  factories  everywhere 
were  months  behind  their  orders.  They  were  not  catering  to  the 
public,  but  to  the  government,  and  had  no  need  to  stimulate 
demand  by  advertising.  During  this  year  1916,  in  spite  of  all 
the  war-news  from  Europe,  in  addition  to  our  own  de  facto  war 
with  Mexico — together  offering  more  news  than  had  been  avail- 
able for  a  generation — the  total  size  of  the  daily  papers  averaged 
from  twenty  to  forty  per  cent  smaller  than  in  1913-15,  probably 
due  to  the  increased  cost  of  paper  and  other  war-expenses. 

But  the  proportion  of  advertising -space  was  not  altered.  As 
more  news  offered  itself,  and  as  the  public  became  more  keenly 
interested,  the  news-space  was  not  expanded  at  the  expense  of  the 
advertising,  as  would  have  been  the  case  had  the  policy  been 
guided  by  the  preferences  of  the  subscribers.  In  other  words, 
the  amount  of  news  dealt  out  to  the  subscriber,  as  well  as  its 
quality,  depends  not  at  all  upon  his  personal  demand  for  news, 
nor  upon  the  supply.  It  depends  wholly  upon  commercial  con- 
siderations. In  modern  journalism  as  elsewhere  throughout  our 
economic  system,  the  law  of  supply  and  demand  gets  but  a 
microscopic  chance  to  operate. 

It  is  these  commercial  considerations  which  dictate  in  the  first 
place,  the  size  of  the  paper  as  a  whole.  Then  out  of  this  the 


500 


MODERN   ECONOMIC   TENDENCIES 


reader  is  given,  regardless  of  other  conditions,  that  maximum 
proportion  of  advertising-space  which  experience  has  proven  the 
traffic  will  bear — that  is  to  say,  which  will  dissuade  only  a  fraction 
of  the  subscribers  from  stopping  the  paper,  in  preference  for 
some  other  sheet  which  is  doing  the  same  thing.  In  this  defiant 
disregard  and  reversal  of  the  law  of  supply  and  demand  by  com- 
mercialism, journalism  is  quite  in  parallel  with  our  food-supply 
and  every  other  commercial  enterprise.  But  our  editors  might  at 
least  confess  the  fact! 

TABLE  54 

INCREASE  IN  ADVERTISING  SPACE  IN  NEWSPAPERS,  1880  TO  1916 
(Columns  of  Advertising  Space) 


Times 

Sun 

World 

Tribune 

Herald 

American 

Press 

1880,      "Sample 

Sunday1''.  .  .  . 

22 

10* 

14* 

13 

92 

•• 

•• 

Sunday  Issues: 

1913,  Nov.  24.. 

325  4 

.  . 

.  . 

.  . 

.  . 

. 

1913,  Dec.    7.. 

394 

.  . 

. 

1915,  Oct.     3.. 

360 

.  . 

.  . 

1915,  Oct.  10.. 

313 

.  . 

.  . 

1916,  July    9.. 

270 

99 

282 

87 

260 

1917,  Oct.  14  6 

386 

•• 

•- 

Daily  Issues:  . 

1913,  Nov.  25.. 

66 

.  . 

.  . 

1913,  Nov.  29.. 

108 

1913,  Dec.    2.. 

79 

22 

. 

59 

30 

1913,  Dec.    4.. 

.  . 

.  , 

82 

.  . 

.  . 

.  . 

1917,  Oct.  10  • 

105 

1919,  June  20.  . 

190 

4  The  Sunday,  according  to  the  Times,  following  "the  dullest  week  in 
Wall  Street  in  many  years." 

sLess  than  42  per  cent  reading-matter  and  pictures. 

«In  this  issue  just  one-third  of  the  total  space  was  news-matter, 
including  the  title-caption  as  such. 

This  proportion  of  advertising  (including  with  it  the  financial 
news,  as  also  being  commercial)  now  varies  usually  between  some 
forty  and  seventy  per  cent  of  the  whole,  leaving  only  about  one- 


INDIRECT  LIGHT   UPON   THE    GROWTH    OF   COMMERCIALISM      501 

half  to  one-third  as  real  news.7  Occasionally  the  reader  gets  in 
the  form  of  news  or  amusement  as  much  as  one-half  of  the  paper, 
for  which  he  pays  the  entire  cost.  If  so,  he  is  in  luck.  Some- 
times the  fraction  runs  as  low  as  one-quarter.8 

In  most  of  the  magazines  there  is  no  financial  news,  all  space 
counted  as  advertising  being  purely  such.  On  the  other  hand, 
purely  financial  journals  of  course  must  be  charged  up  in  en- 
tirety to  commercialism,  as  a  waste  to  the  community. 

Literature's  Growing  Burden. — The  New  York  Times  re- 
cently published  its  own  record  of  the  growth  of  its  own  advertis- 
ing-space during  the  last  twenty  years,  in  figures  which  have 
been  put  into  the  form  of  Table  55  for  present  parposes.  These 
figures  refer,  of  course,  only  to  pure  advertising ;  but  the  finan- 
cial news  has  also  grown  about  in  like  proportions,  so  far  as  one 
can  observe. 

Because  the  general  burden  of  commercialism,  which  is  cen- 
tered chiefly  in  the  cities,  has  been  depicted  here  as  constantly 
being  distributed  therefrom  over  every  citizen  of  the  land,  in  the 
cost  of  commodities,  so  it  is  proper  to  state  these  figures  as  to  the 
growth  of  advertising  in  a  metropolitan  daily,  such  as  the  Times,, 
in  proportion  to  the  national,  rather  than  the  city,  population. 
This  has  been  done  in  Table  55. 

In  this  table  it  is  the  last  two  columns,  giving  the  rate  of  growth 
of  the  total  output  of  advertising-space  by  this  journal,  per  capita 
of  population  of  the  United  States — taking  account  of  both  the 
number  of  copies  issued  and  the  space  per  copy — which  are  of  the 
greatest  significance  in  revealing  the  rate  of  growth  of  advertis- 
ing. It  is  doubtful  whether  there  be  in  this  book  a  better  in- 
dicator than  this — including  in  one  set  of  figures,  as  it  does,  both 
the  increasing  congestion  of  population  in  large  cities  and  the 
intensity  of  advertising  amongst  that  population — of  the  tre- 
mendous acceleration  in  the  growth  of  commercialism  since  the 
Spanish  War. 

^The  first  weekly  at  hand  on  this  date,  the  Literary  Digest  for  May 
25,  1918,  contained  42  per  cent  of  reading-matter. 

sThe  New  York  Times  for  June  20,  1919,  contained  just  25  per  cent 
of  news-matter,  including  lost-and-found  notices,  criminal  court  calendars, 
etc.,  but  excluding  financial  news. 

Even  the  journals  of  the  national  professional  societies  are  con- 
taminated by  this  shameful,  mercenary  infection.  For  instance,  in 
September,  1920,  the  periodical  publishing  the  technical  papers  of  the 
American  Society  of  Mechanical  Engineers  devoted  61  per  cent  of  its 
space  to  advertising. 


502 


MODERN    ECONOMIC   TENDENCIES 


Indeed,  these  figures  might  perhaps  be  considered  a  better 
barometer  of  the  current  state  of  commercial  prosperity  than  are 
any  of  those  adduced  for  that  particular  purpose  in  Chapter 
XXI.  The  sudden  expansion  of  commercialism  in  response  to 
the  Spanish  War  of  1898  is  most  markedly  obvious.  The  minor 
reaction  of  1903  is  also  visible. 

TABLE  55 
GROWTH  or  ADVERTISING  IN  TEE  NEW  YORK  Times,  1896  TO  1916 


Agate  Lines  of  Advertising  in 

Circulation 

Terms  of  Total  Population  of  the 

Ypftr 

per 
Million 
of 

United  States 

Ratio  of  Growth 
of  this  Last 

i  Cell 

National 
Inhab- 
itants 

In  Each  Sheet, 
per  10,000 
Inhabitants 

In  the  Aggregate 
Circulation  of 
Each  Issue, 
per  Inhabitant 

Column  : 
1896  =  Unity 

1896 

279 

335 

663 

1.00 

1897 

309 

328 

732 

1.10 

1898 

349 

330 

848 

1.28 

1899 

1018 

451 

3,441 

5.18 

1900 

1076 

521 

4,278 

6.45 

1901 

1317 

637 

6,522 

9.83 

1902 

1331 

695 

7,328 

11.04 

1903 

1319 

645 

6,860 

10.35 

1904 

1447 

637 

7,567 

11.40 

1905 

1441 

711 

8,580 

12.92 

1906 

1536 

706 

9,262 

13.95 

1907 

1647 

724 

10,380 

15.65 

1908 

1948 

665      . 

11,500 

17.33 

1909 

2041 

796 

14,690 

22.12 

1910 

2088 

820 

15,500 

23.36 

1911 

2104 

867 

17,650 

26.60 

1912 

2476 

926 

22,080 

33.30 

1913 

2602 

958 

24,020 

36.22 

1914 

2950 

924 

28,020 

42.25 

1915 

3270 

959 

31,700 

47.75 

1916 

3310 

1123 

38,230 

57.65 

But  neither  the  dramatic  panic  of  1907  nor  the  equally  im- 
portant but  less  striking  "Silent  Crisis"  of  1914  show  the  slight- 
est influence  in  reversing,  even  momentarily,  this  growth  in 


INDIRECT  LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM      503 

activity  of  advertising.  However  the  passive  commercialism  of 
investments  may  have  been  discouraged  by  these  crises,  they 
apparently  only  incited  the  active  commercialists  to  an  increased 
intensity  of  effort.  Everything  tends  only  to  accentuate  com- 
mercialism.9 

The  New  York  Times  also  published  in  January,  1915,  some 
data  as  to  the  increase  in  circulation  and  advertising  of  the  seven 
principal  dailies  published  in  that  city.  These  figures  simply 
corroborate,  from  a  wider  foundation,  the  showing  made  in  Table 
55  from  a  single  paper.  The  circulation  alone  of  these  seven 
dailies,  in  aggregate,  per  thousand  people  living  in  the  United 
States,  has  grown  recently  at  the  following  rate,  namely: 

1912,  12.7;  1913,  13.0;  1914,  13.3;  1915,  13.7;  1916,  14.0. 

Editorial  Favoritism. — It  is  worthy  of  particular  note  that 
the  editorial  and  sporting  pages  of  every  daily  paper,  in  contrast 
with  all  other  departments,  are  usually  free  from  interspersed 
advertisements — that  combined  curse  and  insult  which  is  handed 
out  to  the  reader  by  virtually  every  daily  and  weekly  journal  in 
the  land.  The  editorial  pages  are  almost  wholly  free  from  this 
blight  and  shame  of  modern  journalism,  and  the  sporting-pages 
often  entirely  so.  The  jolting  contrast  between  reading  and 
advertising  matter  closely  interwoven,  which  is  so  disagreeable 
to  every  self-respecting  reader  of  taste,  is  apparently  too  much 
for  the  personal  self-esteem  of  the  editors,  who  are  here  (alone  of 
all  places  in  the  paper)  permitted  to  assert  their  personal  prefer- 

"On  January  9,  1920,  the  week-day  issue  of  the  New  York  Times 
disclosed  21.3  per  cent  of  its  space  devoted  to  reading-matter  and 
78.7  per  cent  consumed  in  advertising  and  commercial  matter — almost 
one-fifth  and  four-fifths  respectively.  More  than  that,  of  the  four-fifths 
devoted  to  advertising  nearly  a  fifth  was  devoted  to  the  advertisement 
of  advertising -mediums. 

There  can  be  no  doubt  that  the  Times  has  out  "on  the  road"  com- 
mercial representatives  who  are  actually  engaged  in  advertising  the 
Times  as  an  advertising -medium  for  advertising '-mediums!  Then  all  of 
this  costly  triple  distillation  of  commercialism  is  charged  up  to  the 
Ultimate  Consumer,  and  collected  from  him,  without  his  knowledge  or 
consent !  For  New  York 's  most  important  facility  for  the  communication 
of  such  a  fact  to  the  people  is  the  Times  itself!  Without  its  active, 
sympathetic  aid  what  hope  is  there  for  reform?  Who  dares  to  say,  then, 
that  commercialism  is  not  cumulative,  or  that  reform  rests  with  the  will 
of  the  people? 


504  MODERN   ECONOMIC  TENDENCIES 

ences  over  the  heads  of  the  commercial  interests  of  the  paper  as 
a  property,  subsidized  by  its  advertisers. 

Or  is  it  because  the  editorial  pages  are  worth  less  as  an 
advertising-medium,  because  of  the  slight  popular  interest  in 
editorials,  that  this  is  so?  Or  is  it  that  advertisements  never 
appeal  to  the  serious-minded,  who  alone  look  at  the  editorials? 
At  any  rate,  the  readers  have  to  stand  it  on  the  other  pages,  in 
which  they  are  chiefly  interested,  but  the  editors  do  not.  How- 
ever it  may  come  about,  it  is  an  interesting  example  of  that 
chancy  law:  "One  must  draw  the  line  somewhere." 

It  is  also  interesting  to  note  that  the  "sports7'  apparently  will 
not  "stand  for"  the  same  imposition.  But  the  general  run  of 
readers  has  no  such  power  of  coherent  resistance,  and  must 
accept  the  abomination. 

Display  in  General. — It  is  particularly  to  be  noted,  before 
leaving  this  topic  of  advertising,  that  only  one  phase  out  of 
many,  that  appearing  in' periodical  literature,  has  been  touched 
upon  here.  The  vast  volume  of  catalogs,  pamphlets,  circulars, 
dodgers,  calendars  and  other  printed  and  expensively  litho- 
graphed advertising-matter,  which  is  distributed  through  other 
channels,  has  obviously  experienced  a  similar  growth.  But,  ex- 
cept for  the  inclusion  of  the  data  as  to  the  printing  and  litho- 
graphing arts  under  the  heading:  "Munitions  and  Panoply  of 
Commercial  Warfare,"  in  Table  28,  this  cannot  be  brought  under 
even  approximate  statistical  measurement. 

The  census  for  1910,  it  is  true,  gathered  data  as  to  manu- 
facturing establishments  classified  as  devoted  to  "signs  and 
advertising-novelties" ;  but  this  was  the  first  instance  of  this,  so 
that  no  growth  is  recorded.  Moreover,  the  figures  apply  only 
to  the  wholesale  cost  of  a  minute  fraction  of  all  advertising ;  for 
the  aggregates  in  the  report  showed  only  288  such  establish- 
ments, selling  their  output  at  a  total  cost  of  only  fifteen  cents 
per  capita  of  total  population.  Yet  even  this  fact  of  almost 
three  hundred  factories  specializing  upon  advertising,  where  a 
few  years  ago  there  were  none,  is  itself  significant  of  the  growth 
of  the  policy  of  advertising.10 

10  The  telephone-directory  for  New  York  City  for  1920  reveals  be- 
tween fifteen  hundred  and  two  thousand  advertising-agencies,  for  this 
one  city.  Many  of  these  names  are  all  but  lost  between  the  jostling 
advertisements  of  advertisers.  This  shows  a  tremendous  growth  since 
1910. 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      505 

The  great  street  advertising-medium  of  the  present  day  is 
electric  light,  both  in  its  use  for  electric  signs  and  its  much 
wider  employment  for  mere  display  of  brilliant  illumination. 
There  is  scarcely  any  single  industry  which  has  contributed  so 
much  toward  the  growth  of  commercialism,  or  whose  own  growth 
measures  that  of  commercialism,  as  that  of  electric  lighting ;  yet 
this  measure,  concerning  chiefly  cost  for  coal  and  electrical 
machinery,  but  not  personnel  to  any  large  extent,  does  not 
appear  in  our  statistical  estimates. 

All  stores,  theaters,  and  the  like  rely  upon  bright  light  as  the 
very  first  essential  to  success  in  business.  In  the  many  nego- 
tiative  offices  demanded  for  commercial  combat  light  is  not 
relied  upon  to  attract  trade,  it  is  true,  but  it  is  consumed  in 
large  quantities,  nevertheless,  as  an  indirect  aid  in  the  main- 
tenance of  an  active  commercial  correspondence,  etc.  As  a  factor 
in  the  cost  of  commercialism  the  lighting  of  our  office-buildings 
is  no  inconsiderable  item. 

An  editorial  in  the  New  York  Evening  Mail  for  October  13, 
1917,  says: 

"Come  across  on  the  ferry  some  winter  evening  at  six  or 
seven  o'clock.  You  will  see  one  of  the  great  sights  of  the 
continent :  The  great  towering  mass  of  skyscrapers  ablaze  with 
electricity.  It  is  like  an  Olympian  display  of  all  the  jewels 
of  which  man  ever  dreamed,  piled  together  by  the  hands  of 
Titans.  .  .  .  This  vast  illumination  is  all  made  from  coal. 
In  the  New  York  skyscrapers  are  offices  most  of  whose  force 
have  gone  home  at  this  hour,  but  all  lights  are  left  on  until 
the  last  employee  has  left.  One  of  the  proprietors  of  such  an 
office  was  asked  why  he  thus  wasted  light.  His  answer  was : 
'It  goes  with  the  rent.3 

"The  coal  thus  burned  away  in  the  form  of  electricity  could 
be  used  to  run  freight-trains  from  the  munition-factories  of 
Ohio  to  the  Atlantic  seaboard,  to  drive  ocean-liners  from  New 
York  to  France,  to  feed  the  steel-mills  of  Pittsburgh." 

But  all  this  waste  is  due,  in  the  first  place,  to  the  idea  sown 
broadcast  by  commercialism  that  each  person's  welfare  is  de- 
pendent only  upon  his  personal  bank-account,  whereas  the  fac- 
tory-system teaches  that  waste  by  one  hurts  all.  But,  overlook- 
ing that,  does  the  editor  of  the  Mail  dare  to  argue  that,  even  if 
this  light  after  working-hours  were  saved,  it  would  release  a 


506  MODERN    ECONOMIC   TENDENCIES 

single  pound  of  coal  for  the  purposes  he  names?  Because  the 
owner  of  the  building  might  buy  that  much  less  coal,  would  it 
release  a  penny  of  that  money  for  the  good  of  the  nation  ? 

This  wasted  illumination  is  one  of  the  many  parts  of  the  total 
cost  of  commercialism  which  we  are  trying  to  estimate  statis- 
tically, yet  which  escapes  us.  There  exist  no  figures  as  to  its 
growth.  There  are  data  as  to  the  growth  of  electric  central 
stations  (see  Table  30)  of  course,  but  that  is  not  all  of  the 
electric-lighting  industry.  Much  comes  from  private  plants  in 
the  basements  of  hotels  -and  office-buildings.  Much  of  this  waste 
is  too  recent  in  its  origin  to  appear  yet  in  our  decennial  data. 

In  regard  to  all  this  bizarre  illumination  -we  may  only  guess 
at  its  proportions,  and  then  remain  content  to  condemn  it  as  a 
tawdry,  childish  extravagance.  It  is  not  that  it  may  not  please 
many  an  infantile  eye.  It  is  not  that  we  prefer  darkness  to 
light.  It  is  that  this  frantic,  crude  appeal  to  the  eye  for  profit's 
sake  is  a  sensationalism  quite  unworthy  of  that  degree  of  general 
taste  and  intelligence  of  which  we  boast.  The  light  should  not 
be  cut  off;  it  should  be  used  in  the  beautiful  and  dignified 
illumination  of  buildings  devoted  to  the  nation's  business  or 
pleasure,  architecturally  on  a  par  with  the  best  which  Washing- 
ton or  our  World's  Fairs  have  to  offer. 

Advertising,  whether  by  electric  light  or  otherwise,  is  now  one 
of  the  most  important  of  all  occupations  in  the  waging  of  com- 
mercial war.  Men  especially  gifted  in  this  line  command  high 
salaries.  Space  prominent  in  the  public  eye  brings  high  prices. 
Much  high  rent  is  due  to  this.  Whole  corporations  are  devoted 
exclusively  either  to  the  design,  or  the  placing,  or  the  mailing 
of  advertisements  in  large  quantities. 

Yet  of  all  this  great  and  growing  business  scarcely  an  atom 
can  appear  directly  in  the  statistics  available.  It  is  the  necessary 
allowance  for  this  fact  which  has  made  it  scientifically  permis- 
sible and  imperative  to  classify  occupations  somewhat  as  has 
been  done  in  "Total  p,"  drawing  the  line  between  production 
and  commercialism  in  such  a  way  that  justice  might  best  be 
done  to  that  institutional  devil,  commercialism. 

Manufactures. — In  Chapter  XVII,  concerning  aggregate 
commercialism,  it  was  important  to  center  attention  upon  figures 
covering  all  branches  of  industry  at  once.  That  once  done,  it 
now  becomes  permissible  to  look  here  and  there  at  fractions  of 
industry  for  chance  indications.  Of  these  fractions  one  of  the 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF  COMMERCIALISM      507 


most  important  is  manufacture,  which  forms  a  topic  by  itself 
in  the  census-reports  and  thus  constitutes  one  of  our  most 
definite,  if  incomplete,  sources  of  information  as  to  national 
economic  tendencies.  Tables  56  and  57  set  forth  the  progress 
in  this  field. 

TABLE  56 
MANUFACTURE  IN  TERMS  OP  POPULATION,  1850  TO  1910 


Number 
of  Estab- 

Capital 

Wage- 
earners 

Wages 
per  Annum 

Cost  of 
Materials 

Value  per 
Million  Inhab. 

•\T  _ 

lishments 

per 

per 

per 

Year 

per 
Million 
Popu- 
lation 

Inhab- 
itant 

1000 
Popu- 
lation 

Per 

Inhab- 
itant 

Per 

Wage- 
earner 

Million 
Inhab- 
itants 

Of 
Product 

Added 
by 
Manu- 

facture 

1850 

5305 

$22.98 

41.2 

$10.22 

$247 

$23.93 

$43.93 

$20.00 

1860 

4455 

32.11 

41.7 

12.05 

289 

32.82 

59.97 

27.15 

1870 

6540 

43.94 

53.3 

16.07 

302 

51.62 

87.79 

36.17 

1880 

5060 

55.62 

54.5 

18.90 

347 

67.72 

107.07 

39.35 

1890 

5645 

103.70 

67.6 

30.04 

444 

82.00 

148.88 

66.88 

1900 

6715 

128.50 

69.5 

30.42 

437 

96.20 

170.28 

74.08 

1900 

2719 

117.55 

61.8 

26.30 

426 

86.15 

149.45 

63.30 

1905 

2581 

151.40 

65.3 

31.16 

477 

101.50 

176.56 

75.06 

1910 

2920 

200.30 

71.8 

37.24 

518 

132.00 

224.70 

92.70 

192011 

(3135) 

(341.00) 

(83.5) 

(52.75) 

(630) 

(202.00) 

(338.00) 

(135.00) 

11  Estimates,  taking  no  account  of  the  Great  War,  but  based  only  upon 
the  previous  rate  of  growth  of  commercialism. 

Should  it  seem  natural  that  manufactures,  which  form  the 
basis  for  such  complete  statistical  report,  ought  to  have  been 
made  the  first  foundation  for  our  contrast  between  production 
and  commercialism,  it  need  only  be  pointed  out,  in  reply,  that 
all  of  the  data  regarding  manufactures  appear — and  necessarily 
so — in  dollars.  But  since  it  is  a  first  requisite,  in  defining  this 
contrast,  to  get  away  from  the  dollar,  because  it  is  a  varying 
measure,  and  to  consider  only  actual  human  energy,  it  has 
obviously  been  necessary  to  pass  by  all  this  alluring  mass  of 
data  as  to  wages,  produce,  etc.,  until  the  actual  purchasing- 
power  of  the  dollar  had  been  measured — first  by  counting  heads, 


508 


MODERN   ECONOMIC   TENDENCIES 


and  then  by  estimating  the  character  of  the  exertion.  Now  that 
this  has  been  done,  these  statistics  in  terms  of  dollars  may  be 
taken  up  as  of  incidental  interest. 

In  all  these  tables  regarding  manufacture  the  double  values 
for  the  year  1900  are  due  to  the  fact  that  in  that  year  the 
census-bureau  altered  its  system  of  classifying  manufacturing- 
establishments,  shutting  out  many  of  the  very  small  ones  which 
had  been  included  since  1850.  But,  by  altering  from  the  earlier 
to  the  later  standard  of  comparison,  in  passing  1900,  the  tables 
show  truly  the  tendencies  in  both  periods. 

TABLE  57 
MANUFACTURE:  RELATIVE  TENDENCIES,  1850  TO  1910 


Capital 

Value 
Added 

Wage- 

Rate  of 
Growth: 

Year 

Per 

Estab- 
lishment 

Per 

Inhabi- 
tant 

Per 

Wage- 
earner 

Per 

$lof 
Wages 

per 

$1 
Wages 

per 
Estab- 
lishment 

Per  cent 
Per 
Decade 

1850 

$4,330 

$22.98 

$557 

$2.25 

$1.96 

7.77 

1860 

7,200 

32.11 

771 

2.66 

2.25 

9.34 

20 

1870 

6,745 

43.94 

825 

2.73 

2.25 

8.15 

-13 

1880 

11,000 

55.62 

1020 

2.94 

2.08 

10.77 

32 

1890 

18,350 

103.70 

1533 

3.45 

2.23 

11.97 

11 

1900 

19,130 

128.50 

1848 

4.22 

2.44 

10.37 

-13 

1900 

43,260 

117.55 

1904 

4.47 

2.41 

22.7 

1905 

58,600 

151.40 

2318 

4.86 

2.41 

25.3 

23 

1910 

68,650 

200.30 

2787 

5.38 

2.47 

24.6 

-  6 

Thus,  by  assuming  that  the  growth  recorded  since  1900  ap- 
plies equally  to  small  and  large  establishments,  which  appears  to 
be  true,  the  ratios  of  progress  can  be  made  continuous  from  1850 
to  the  present  time.  In  this  way  the  alteration  in  average  size 
of  establishment  during  the  sixty  years  is  made  visible  in  the 
last  column  of  Table  57.  Discounting  the  fact  that  three  times 
a  reversal  of  growth  is  recorded — once  during  the  decade  of  the 
Civil  War,  again  during  the  decade  preceding  the  Spanish  War 
and  comprising  the  panic  of  1895,  and  a  third  time  during  the 
half -decade  comprising  the  panic  of  1907 — the  average  rate  of 


INDIRECT  LIGHT  UPON  THE   GROWTH    OF    COMMERCIALISM      509 

growth  in  size  of  factory,  for  the  entire  period  from  1850  to 
1910,  has  amounted  to  about  seven  per  cent  per  decade. 

Centralization  or  Decentralization. — The  fact  first  to  be 
noted  in  Table  56  is  the  obvious  lack  of  any  centralization  of 
industry  with  time,  as  would  be  revealed  by  the  second  column 
if  it  had  occurred.  The  number  of  establishments  per  million  of 
population  has  remained  virtually  constant  throughout  the  last 
sixty  years.  If  there  has  been  any  variation  it  has  been  in  the 
way  of  an  increase  in  number  per  capita,  or  in  the  direction  of 
decentralization  of  industry. 

The  data  cannot  be  doubted.  Two  of  the  intermediate  dec- 
ades, it  is  true — 1860  and  1880 — show  a  temporary  retrogres- 
sion ;  but  it  is  temporary  only.  That  for  1860  may  be  due  to  a 
deficient  registration.  That  for  1880  may  be  due  to  the  panic 
of  1873,  from  which  the  country  recovered  slowly.  But  by  1870 
that  wonderful  outburst  of  industry  and  commerce  in  the  North 
which  began  in  1863  and  1864  had  brought  the  number  of 
manufacturing-establishments  per  inhabitant  almost  to  the  maxi- 
mum reached  only  in  1900. 

The  figures  for  1900  are  the  highest  of  any  of  the  previous 
decades,  under  the  same  classification.  Yet  those  for  1910  are 
some  eight  per  cent  higher  still  than  those  for  1900,  under  the 
same  classification. 

Taking  the  figures  just  as  they  stand,  the  general  tendency, 
averaged  over  the  sixty  years,  consists  of  a  51/^  per  cent  increase 
per  decade  in  number  of  manufacturing  establishments  per 
capita  of  population — 4.8  per  cent  previously  to  1900,  and  7.4 
per  cent  per  decade  since  then.  Yet  the  change  in  classification 
in  the  year  1900  was  certainly  such  as  to  minimize  this  showing. 
The  later  classification,  as  shown  both  by  the  second  column  of 
Table  56  and  the  second  and  seventh  columns  of  Table  57,  ex- 
cludes many  smaller  establishments  which  in  earlier  years  had 
been  deemed  worthy  of  inclusion.  If  the  classification  had 
remained  unchanged  in  1900  the  record  of  a  steady  decentral- 
ization of  industry  would  have  been  still  more  marked.12 

The  importance  of  these  facts,  in  their  bearing  upon  current 
legislation  and  economic  ideas,  cannot  be  too  strongly  em- 
phasized. According  to  these  statistics  the  present  almost 
universal  belief  throughout  America — the  national  economic 

12  For  the  even  more  exaggerated  decentralization  of  the  banking  in- 
dustry, see  page  112. 


510  MODERN   ECONOMIC   TENDENCIES 

faith,  one  might  say — in  a  general  trend  toward  the  consolida- 
tion of  industry  into  a  few  centralized  "trusts"  or  monopolies, 
is  not  supported  by  the  historical  facts  in  any  slightest  degree ! 
Whatever  may  be  the  explanation  of  our  growing  social  ills,  the 
one  thing  certain  is  that  we  are  not  suffering  at  all  from  growing 
monopoly,  but  from  a  quite  appreciable  growth  in  directly  the 
opposite  direction,  namely,  toward  a  steady  decentralization  of 
industry  into  commercial  anarchy. 

It  is  this  national  faith  which  has  led  us  in  the  past  (in  1890) 
into  the  passage  of  the  federal  statute  against  virtual  monopoly 
called  the  Sherman  anti-trust  law.  This  law  has  formed  the 
foundation  for  numerous  costly  governmental  suits  against  the 
larger  corporations  since  then,  in  a  futile  attempt  to  enforce  it; 
it  has  never  been  of  the  slightest  use  for  the  protection  of  the 
people  against  rising  prices ;  yet  it  still  animates  most  of  the  cur- 
rent editorials  relating  to  economic  injustice.  Yet  it  possesses 
not  a  hair  of  support  in  the  most  accessible  facts  of  American 
history ! 

It  is  this  national  faith  which,  in  the  minds  of  the  Democratic 
party,  justifies  its  attitude  upon  the  tariff.  It  is  this  belief 
which,  in  the  minds  of  the  Socialists,  warrants  their  hopes  for  an 
ultimate  transfer  of  these  centralized  industries  to  the  control 
of  the  workingmen.  Yet  this  belief  is  not  warranted  by  any 
statistical  foundation  whatever. 

Indeed,  this  present  book  has  been  written  primarily  to 
emphasize  the  fact — obvious  to  any  who  care  to  inquire — that 
our  great  national,  or  international,  danger  lies  in  the  trend  of 
affairs  exactly  in  the  opposite  direction  from  that  guarded 
against  so  zealously  by  the  Sherman  anti-trust  law,  namely,  the 
continuous,  rapid  and  accelerating  decentralization  of  all  indus- 
try. For  that  is  the  process  which  has  been  characteristic  of  our 
recent  economic  evolution.  This  decentralization  is  due,  of 
course,  to  the  constant  flood  of  new,  infantile  industries  born  of 
invention. 

Since  a  mere  glance  at  the  census-reports  is  all  that  is  needed 
to  settle  these  facts,  it  is  impossible  to  understand  how  so  erro- 
neous an  idea  has  obtained  such  wide  prevalence  throughout  an 
intelligent  population.  Our  editors  must  have  been  doing  some 
crass  jumping  at  conclusions,  merely  because  they  saw  consoli- 
dations occurring  about  them.  There  must  be  some  basic  fault  in 
our  sources  of  politico-economic  science,  that  this  basic  error  of 


INDIRECT  LIGHT  UPON  THE  GROWTH  OF  COMMERCIALISM      511 

editors  and  politicians  was  not  rebuked  out  of  existence,  years 
ago,  by  the  universities. 

But  the  support  for  this  fact  of  decentralization  need  not  be 
confined  to  data  relating  only  to  manufactures.  It  is  cor- 
roborated broadly  by  the  figures  as  to  the  number  of  business- 
concerns  in  general,  as  reported  by  Bradstreet.  The  basis  upon 
which  these  concerns  listed  in  Table  58  were  selected  by  Brad- 
street  cannot  be  stated,  but  it  naturally  would  not  include  the 
many  very  small  ones.  But  since  relative  direction  of  growth, 
rather  than  absolute  quantities,  is  all  that  is  desired  here,  this 
is  of  no  consequence,  so  long  as  the  classification  remains  un- 
changed. 

TABLE  58 
NUMBER  OP  BUSINESS  CONCERNS  (PER  TEN  THOUSAND  INHABITANTS) 


1881  152 

1887  158 

1893  158 

1899  150 

1905  162 

1911  175 

1882  156 

1888  158 

1894  153 

1900  152 

1906  164 

1912  175 

1883  158 

1889  159 

1895  151 

1901  155 

1907  166 

1913  176 

1884  158 

1890  157 

1896  152 

1902  156 

1908  168 

1914  176 

1885  157 

1891  158 

1897  150 

1903  158 

1909  171 

1915  175 

1886  159 

1892  158 

1898  149 

1904  159 

1910  173 

1916  174 

Table  58  gives  the  variation  in  number  of  such  concerns  per 
ten  thousand  inhabitants  over  the  last  thirty-five  years.  Up  to 
the  year  1900  the  number  of  business-concerns  per  capita,  while 
not  showing  any  increase,  plainly  shows  no  decrease  at  all.  Yet 
the  popular  clamor  against  "the  trusts,"  which  had  been  suffi- 
cient, even  so  early  as  1890,  to  secure  the  enactment  of  a  federal 
statute,  would  indicate  that  there  must  have  been  a  very  great 
decrease  in  number — meaning  an  increase  in  centralization. 

Since  1900,  according  to  Bradstreet's  data,  business  has  been 
undergoing  a  fairly  steady  process  of  decentralization,  at  the  rate 
of  an  8.8  per  cent  increase  in  number  of  business-concerns  per 
capita  per  decade.  Indeed,  during  the  period  from  1899  until 
1911  this  decentralization  of  industry  was  maintained  at 
an  average  rate  of  nearly  14  per  cent  increase  in  number  of  con- 
cerns per  capita  per  decade.  Yet  this  was  just  the  period  when 
was  inaugurated  that  national  policy  of  consolidation  of  concerns 
and  expansion  of  capitalizations  at  such  an  astonishing  rate  as 
to  alarm  even  Eussell  Sage! 


512  MODERN  ECONOMIC  TENDENCIES 

Decentralization  Our  Real  Problem.— This  certainly  does 
not  look  as  if  a  centralization  of  industry  were  proceeding  at 
such  a  rate  as  to  endanger  the  liberties  of  the  people,  warranting 
legislation  as  drastic  and  litigation  as  costly  as  has  been  that  of 
the  Sherman  anti-trust  law.  Indeed,  the  truth  is  the  exact 
opposite  of  that.  Our  statistics,  including  Tables  27  and  28, 
show  that  it  is  decentralization  which  is  occurring  so  steadily, 
even  if  not  rapidly,  as  to  promise  soon  a  critical  stage  in  that 
direction.  If  decentralization  is  what  the  people  really  need 
(which  it  is  not)  then  they  are  now  getting  it  automatically, 
without  the  aid  of  any  legislation — or  in  spite  of  what  is  already 
enacted — at  such  a  rate  that,  if  nothing  intervenes  before  then 
to  disturb  present  rates  and  directions  of  growth,  the  number  of 
concerns  in  competition,  per  capita,  promises  to  have  doubled 
in  less  than  two  generations! 

Industry,  of  course,  is  unquestionably  undergoing  continual 
consolidation.  That  is  to  say,  individual  concerns  are  consol- 
idating. If  we  permit  ourselves  to  be  misled  by  the  quite 
gratuitous  and  childish  assumption  that  there  are  always  a 
constant  number  of  such  individual  enterprises  in  existence, 
awaiting  consolidation — or,  in  other  words,  that  no  new  enter- 
prises ever  are  formed — then  of  course  the  inevitable  result  of 
consolidation  would  be  centralization. 

But  plainly  this  assumption  may  not  be  taken  seriously.  New 
business-enterprises  are  continually  being  undertaken,  and  in 
large  numbers.  If,  while  any  given  consolidation  is  being 
effected,  more  new  enterprises  are  started  than  were  absorbed 
in  the  consolidation,  then  the  result  must  be  the  exact  opposite 
of  centralization.  This  is  obviously  the  process  which  has  under- 
lain all  our  recent  and  current  economic  evolution. 

It  is  particularly  worthy  of  note  that  business-concerns  in 
general  are  decentralizing  more  rapidly  than  are  the  factories. 
Whereas  the  factories  are  increasing  in  number  per  capita  at  the 
average  rate  of  5.25  per  cent  per  decade,  business-concerns  in 
general  (including  possibly  some  factories  with  the  more  purely 
commercial  concerns)  are  growing  at  the  rate  of  8.80  per  cent, 
or  two-thirds  as  rapidly  again.  That  is  to  say,  while  invention 
is  increasing  the  decentralization  of  all  sorts  of  industro-com- 
mercial  enterprise,  it  is  affecting  the  commercial  side  of  the  field 
much  more  rapidly  than  it  is  the  productive  side.  This  fact  is 
in  line  with  all  others  which  have  been  quoted  herein  to  show 


INDIRECT  LIGHT   UPON   THE   GROWTH   OF   COMMERCIALISM       513 

the  continual  diversion  of  the  good  latent  within  invention  into 
commercial  combat,  rather  than  its  conservation  for  increasing 
production,  and  its  loss  thereby  in  economic  dissipation. 

Decentralization  in  Series  and  in  Parallel. — The  trouble 
resultant  from  this  constantly  invading  host  of  new  combative 
enterprises,  it  is  to  be  noted,  is  not  primarily  that  it  develops 
too  many  steps  in  series  between  producer  and  Ultimate  Con- 
sumer, as  is  now  so  frequently  complained,  but  that  there  are 
now  too  many  middlemen  in  parallel,  side  by  side,  at  each  step. 
It  is  doubtful  if  even  an  ideal,  unitary  administration  of  all 
industry  upon  a  complete  factory-system  would  reduce  the  num- 
ber of  successive  steps  very  far  below  what  they  are  now.  But 
while  there  are  probably  not  over  two  or  three  times  too  many 
steps  in  series — in  the  most  favorable  cases,  at  least — there  are 
often  ten  or  twentyfold  too  many  men  in  parallel  at  each  of  these 
steps. 

The  High  Cost  of  Buying. — It  is  the  deadly  doubt  which 
must  arise  at  each  of  the  many  sales  and  purchases  as  to  which 
is  the  man,  and  what  the  proper  price,  and  what  the  mysteriously 
shrouded  quality,  which  is  eating  the  substance  out  of  this  rich 
country.  It  is  the  lack  of  opportunity  to  know  that  there  is  but 
one  man  to  whom  to  go,  and  but  one  price  to  be  had  wherever  one 
might  go,  and  only  standardized  qualities,  with  price  propor- 
tioned to  cost — which  wastes  all  the  time,  money,  energy  and 
courage  of  the  people.  The  prime  poverty  from  which  this  ultra- 
rich  nation  now  suffers  is  its  lack  of  monopoly — of  monopoly 
owned  ~by  the  Ultimate  Consumer. 

For  instance,  an  inspection  of  the  volumes  of  evidence  taken 
recently  before  the  New  York  Food  Commission,  in  protest 
against  the  rising  cost  of  living,  reveals  everywhere  the  effort  of 
the  Commission  to  uncover,  as  the  suspected  cause  of  high  prices, 
two  alleged  evils,  namely,  (1)  unnecessary  transportation,  and 
(2)  monopoly.  Yet  the  evidence  failed  to  sustain  either  of  these 
hypotheses.  Much  unnecessary  transportation  was  shown  to 
exist,  it  is  true ;  but  it  was  also  shown  that  this  factor  was  quite 
inadequate  as  an  explanation  of  more  than  a  small  fraction  of 
the  increase  in  prices.  Partial  monopoly  was  also  shown  to  exist 
in  some  cases,  but  there  was  complete  lack  of  evidence  that  it 
elevated  prices  any  higher,  if  so  high,  as  did  competition. 

Apparently  there  was  never  a  suspicion  on  the  part  of  the 
Commission,  although  there  was  plenty  of  evidence,  that  it  was 


514  MODERN   ECONOMIC   TENDENCIES 

the  lack  of  monopoly  at  every  step  in  the  many  transfers  which 
so  multiplied  the  cost  of  each.  Nothing  is  so  expensive  as  com- 
mercial competition.  Nothing  is  so  efficient  as  monopoly,  if 
properly  handled. 

Growth  of  Factories  in  Size. — To  return  to  the  statistics  of 
manufacture,  it  is  true  that  the  average  size  of  establishment, 
whether  measured  in  personnel  or  in  capital,  is  steadily  increas- 
ing. Yet  even  in  the  former  respect  it  is  not  so  rapid  as  is 
usually  imagined,  being  in  1900  only  33  per  cent  and  1910  only 
about  45  per  cent  greater  than  in  1850,  the  era  of  hand-cut  nails 
and  bench-made  shoes. 

While  the  largest  factory  is  steadily  becoming  larger,  yet  the 
smallest  size  of  factory  continues  to  be  fully  represented  in 
larger  and  larger  numbers.  The  newcomers  are  virtually  all  of 
the  smallest  size  listed.  We  are  acquiring  our  big  factories  and 
other  business  concerns  in  the  same  manner  as  we  are  acquiring 
our  big  cities  and  our  big  personalities,  namely,  by  the  unchecked 
growth  of  individuals  all  of  whom  were  lorn  infants.  The  con- 
tinual influx  of  newborn  infants,  by  its  increasing  numbers, 
keeps  down  the  averages  in  spite  of  the  growth  of  all  at  once. 

For  in  the  growth  of  cities  or  factories  the  old  and  big  do  not 
die  off,  at  a  certain  point,  as  they  do  among  people.  Just  as,  in 
Tables  16  to  19,  we  saw  how  the  population  living  in  cities  kept 
itself  about  even  divided  between  the  several  sizes  of  city,  in  spite 
of  the  constant  growth  of  every  city  in  the  land,  and  especially 
of  the  larger  cities,  so,  in  industry  or  business,  the  population  at 
work  keeps  itself  about  equally  divided  between  the  various 
sizes  of  factory  or  other  concern,  in  spite  of  continual  consolida- 
tion. 

It  even  tends  toward  a  scattering  decentralization.  If  the  few 
factories  are  much  larger,  there  is  also  a  larger  number  of  the 
very  small,  and  particularly  of  new  selling-offices.  Table  56 
shows  that,  even  in  comparison  with  the  relatively  enormous 
population  of  to-day,  the  number  of  manufacturing-establish- 
ments per  capita  had  actually  become  26  per  cent  greater  in 
1900,  and  36  per  cent  greater  in  1910,  than  in  1850,  which  was 
peculiarly  the  era,  apparently,  of  sparse  population  and  very 
small,  unconsolidated  factories. 

The  lessons  of  Tables  56  and  57  will  be  more  obvious  if  drawn 
from  Table  59,  which  gives  the  same  data  translated  into  relative 
rates  of  growth,  in  terms  of  100  for  1850.  From  Table  59  it 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      515 


becomes  obvious  that  nothing  about  manufacturing  industry  has 
grown  so  rapidly  as  has  capital  per  capita  of  total  population. 
This  to-day  doubtless  exceeds  by  tenfold  that  of  1850,  since  by 
1910  it  had  grown  to  well  over  ninefold. 

In  comparison  or  contrast  with  this,  capital-per-establishment 
— which  is  really  what  is  back  of  the  discontent  which  created 
the  Sherman  anti-trust  law  (although  its  advocates  dream  that 
it  is  monopoly  which  played  that  role) — has  increased  only  some 
six  hundred  per  cent.  Capital  per  wage-earner,  which  is  the 
basis  for  orthodox  socialism,  has  increased  only  about  four 
hundred  per  cent.  Indeed,  capital  per  dollar  of  wage  has  in- 
creased only  about  150  per  cent.  "Value  added"  per  dollar  of 
wage,  which  is  what  is  back  of  the  I.  W.  W.  philosophy,  has 
increased  only  26  per  cent  in  the  sixty  years. 

TABLE  59 
RELATIVE  RATES  OF  GROWTH  IN  MANUFACTURE,  1850  TO  1910 


Wage- 

Capital  per 

Establish- 

"Value 

til       J  1  9 

earners 

ments  per 

Added 

Year 

per 

Estab- 

Estab- 
lish- 

Inhab- 

Wage- 

Dollar 

nf 

Million  of 
Popu- 

per 
Dollar 

lishment 

lloll 

ment 

itant 

earner 

Ul 

Wage 

lation 

of  Wage 

1850 

100 

100 

100 

100 

100 

100 

100 

1860 

120 

166 

140 

138 

118 

84 

115 

1870 

105 

156 

191 

148 

121 

123 

115 

1880 

138 

254 

242 

183 

131 

95 

108 

1890 

153 

424 

451 

275 

153 

106 

114 

1900 

133 

442 

559 

332 

187 

126 

124 

1900 

292 

442 

559 

342 

199 

126 

123 

1905 

326 

599 

720 

416 

216 

120 

123 

1910 

317 

701 

952 

500 

239 

136 

126 

But  the  thing  particularly  to  .be  noted  by  the  conservative 
reader,  of  whatever  school,  is  that  the  marked  characteristic  of 
the  last  sixty  years  of  progress  has  been  the  enormous  increase  in 
capitalism  in  proportion  to  any  basis  of  reference  whatever.  The 
thing  to  be  noted  by  the  radical  on  the  other  hand,  is  that  it  is 
when  the  basis  of  reference  is  the  individual  citizen,  without  any 
reference  to  whether  he  be  a  wage-earner  or  what,  that  the  un- 


516 


MODERN  ECONOMIC  TENDENCIES 


balanced  growth  of  capitalism  becomes  most  disproportionate 
and  topheavy.  For  the  socialists  lay  all  their  stress  upon  the 
question  of  wage-earners  vs.  wage-payers — a  distinction  which 
will  increasingly  be  proven,  as  this  analysis  proceeds,  to  be 
irrelevant  and  futile. 

Growth  of  the  Harvester  Trust. — As  an  illustration  of  a 
single  industry  which  has  undergone  that  consolidation  which  is 
so  much  in  the  public  mind,  Table  60  displays  the  past  progress 
in  the  manufacture  of  agricultural  implements,  which  finally 
resulted  in  what  is  known  as  "the  harvester  trust/'  Here  is 
visible  the  steady  and  rapid  decrease  in  the  number  of  factories, 
in  proportion  to  population,  the  slow  decrease  in  the  number  of 
wage-earners,  and  the  rapid  increase  in  capitalization  in  the 
face  of  these  decreases,  while  the  value  of  output  remains  fairly 
constant. 

TABLE  60 
AGRICULTURAL  IMPLEMENTS,  1870  TO  1910 


Number  of 
Establish- 

Wage-earners 

Value 
Added, 

Capitalization 

Year 

ments  per 
Million 
Inhabitants 

per 
Million 
Inhabitants 

per 
Thousand 
Inhabitants 

Per 
Thousand 
Inhabitants 

Per 
$1  of  Value 
Added 

1870 

53.8 

654 

$13,500 

$9,030 

$0.67 

1880 

38.7 

789 

13,680 

12,380 

0.90 

1890 

14.4 

617 

12,900 

23,100 

1.71 

1900 

9.4 

597 

13,270 

20,670 

1.56 

1905 

7.7 

566 

13,380 

23,500 

1.76 

1910 

7.0 

549 

15,900 

27,860 

1.75 

This  last  fact  becomes  luminous  with  explanation  when  one 
meets  the  common  defense  of  capitalism,  namely,  that  the  latter 
is  harmless  so  long  as  it  represents  no  more  than  the  value  of  the 
plant.  The  trouble  is  that,  under  commercialism,  the  valuation 
of  the  plant,  that  of  the  output  and  that  of  the  capitalization, 
must  all  keep  pace  with  one  another,  under  that  law  of  com- 
mercial equilibrium  which  we  have  quoted  from  Professor 
Fisher  and  the  meaning  of  which  we  have  tried  to  make  clear. 
This  law  is  that  the  valuation  of  the  plant  (and  hence  its  capital- 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      517 

ization)  is  fixed  by  the  valuation  of  the  output;  and  further 
that  this  last  is  always  the  maximum  which  the  traffic  in  that 
particular  line  will  bear.  While  variation  away  from  this  law 
may  be  observed  in  some  one  plant,  for  the  entire  land  and  for 
most  individual  plants  it  holds  true. 

Particular  Manufactures. — The  growth  of  commercialism  is 
also  shown  indirectly  by  the  relatively  rapid  rate  of  growth  of 
certain  manufacturing  industries,  particularly  those  classed 
under  I  or  m  in  Table  28,  as  compared  with  the  average  rate; 
but  from  any  attempt  to  estimate  the  growth  of  commercialism 
in  this  way  we  are  forced  to  exclude  many  industries  most  closely 
related  to  commercialism,  such  as  typewriters,  electric  light,  etc., 
because  they  are  of  too  recent  an  origin  to  have  a  history  safely 
comparable  with  the  gradual  growth  of  commercialism.  Thus 
full  justice  cannot  be  done  to  the  subject. 

Nevertheless  Table  61,  giving  the  relative  growth  of  some  of 
these  particular  manufactures,  in  comparison  with  the  average 
growth  of  all  manufacture,  is  submitted,  as  being  significant,  so 
far  as  it  goes.  The  figures  are  stated  in  terms  of  market-value 
of  output  in  proportion  to  population,  because  for  this  purpose 
the  varying  unit  of  measurement,  the  dollar,  obviously  has  the 
same  value  for  all  industries  at  any  one  time.  The  figures  for 
1905  and  1910  are  based  upon  the  assumption  that  the  rate  of 
growth  has  not  been  affected  by  the  change  in  classification  in 
1900. 

Of  the  industries  tabulated,  some  are  shown  because  they  in- 
dicate positively  the  growth  of  commercialism,  some  because 
they  do  so  negatively,  and  some  as  merely  of  general  interest. 
Thus  "printing  and  publishing"  has  not  grown  even  so  fast  as  the 
average  for  all  manufactures ;  yet  "newspapers  and  periodicals," 
which  is  merely  one  portion  of  "printing  and  publishing,"  has 
grown  more  than  half  as  fast  again — an  indication  of  the  relative 
profitableness  of  advertising,  under  the  commercial  warfare 
system. 

Again,  "women's  clothing"  shows  a  phenomenal  growth — 
over  four  times  the  average ;  yet  this  has  only  a  partial  bearing 
upon  the  growth  of  commercialism,  because  this  industry  is  one 
of  those  which  has  been  shifting  steadily  throughout  the  fifty 
years  from  the  home,  where  it  was  unenumerated,  to  the  factory, 
where  it  was  so.  Yet  in  part,  also,  this  tremendous  growth 
indicates  woman's  prerogative  of  spending  upon  her  personal 


518 


MODERN   ECONOMIC  TENDENCIES 


adornment — in  "vicarious  display/'  to  use  Professor  Veblen's 
term — much  of  the  large  unearned  incomes  which  are  charac- 
teristic of  the  later  decades  of  commercialism.  The  growth  of 
some  of  these  industries  which  are  grouped  with  women's 
clothing  also  shows  a  replacement  of  earlier  importations  from 
abroad  by  domestic  manufacture. 

TABLE  61 

MANUFACTURE — RATE  OF  INCREASE  IN  VALUE  OF  OUTPUT  OF  PARTICULAR 
INDUSTRIES,  PER  CAPITA,  1860  TO  1910 13 


1860 

1870 

1880 

1890 

1900 

1905 

1910 

All  Industries       

100 

103 

178 

248 

284 

335 

427 

Newspapers  and  Periodicals.  . 
Printing  and  Publishing  

Women's  Clothing  

100 

103 
147 

212 

178 

279 

447 
218 

474 

475 
226 

914 

578 
294 

1295 

692 
399 

1830 

Millinery  and  Lace  Goods  .  .  . 
Buttons 

100 

103 
152 

117 
294 

175 
222 

236 
331 

370 
440 

570 
818 

Artificial  Flowers  and  Feathers 
Perfumery  and  Cosmetics.  .  .  . 
Soda  Fountain  and  Supplies  . 

Men's  Furnishings 

100 
100 

76 
135 
103 

290 
113 

82 

178 

430 
189 
199 

369 

246 
239 
250 

453 

34i 
309 

455 

778 
398 
439 

708 

Cigars  and  Cigarettes  .      ... 

100 

299 

441 

712 

724 

882 

978 

Distilled  and  Malt  Liquors  .  . 
Scales  and  Balances  

100 
100 

156 

178 

186 
158 

194 

89 

286 
167 

335 
174 

412 
232 

Libels  and  Tags  

178 

172 

150 

304 

525 

Paper  Bags 

103 

220 

214 

239 

323 

457 

Fancy  and  Paper  Boxes  
Wooden  Packing-boxes  

100 
100 

282 
377 

413 
410 

807 
657 

967 
810 

1189 
1084 

1600 
1326 

Envelopes 

100 

324 

246 

317 

340 

502 

602 

Gas  .  .                      

100 

217 

287 

260 

391 

474 

Gas  and  Electric  Fixtures.  .  .  . 

Carriages,  Wagons  and  Auto 
mobiles                             .  .  . 

100 
100 

147 
151 

120 
124 

173 
167 

210 
165 

292 
196 

452 
392 

13  Where  an  industry  lacks  data  extending  back  as  far  as  1860  its 
rate  of  increase  is  figured  by  starting  at  its  earliest  date  with  the  figure 
for  * '  All  Industries ' '  for  that  year. 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      519 

No  indulgence  of  womankind  in  dress  or  confections  has 
grown  any  faster  than  has  man's  use  of  tobacco — if  it  can  be 
called  exclusively  man's  any  longer.  Alcoholic  liquors,  while 
growing  more  slowly  than  tobacco,  still  show  a  fourfold  con- 
sumption, as  measured  in  price,  in  spite  of  the  marked  growth 
of  prohibition  sentiment.  Those  territories  which  are  still  "wet" 
are  plainly  expanding  their  consumption  of  alcohol  at  a  rate  suf- 
ficient to  overtop  the  cessation  of  its  use  in  the  "dry"  territories. 

The  growth  in  number  of  retail  purchases  is  indicated  roughly 
by  the  data  as  to  "scales  and  balances"  and  "paper-bags."  Both 
of  these  are  ancillary  to  the  handling  of  life-supporting  com- 
modities ;  yet  neither  of  them  exceeds  the  general  average  growth 
in  manufacture,  while  the  former  attains  only  about  half  the 
rate. 

But  when  one  turns  to  the  features  of  retail  trade  or  office- 
business  which  are  indicative  of  commercial  competition,  the 
rapidity  of  growth  again  becomes  startling.  "Labels  and  tags" 
have  exceeded  the  average  by  23  per  cent,  "envelopes"  by  41 
per  cent,  "wooden  packing-boxes"  by  210  per  cent  and  "fancy 
and  paper  boxes"  by  275  per  cent. 

The  great  growth  of  the  gas-industry  is  shown  as  merely  in- 
teresting, in  spite  of  the  advent  of  electricity — which  last,  indeed, 
has  been  indirectly  instrumental  in  increasing  the  use  of  gas, 
for  cooking,  by  cultivating  a  standard  of  domestic  luxury  which 
will  no  longer  cook  with  wood  or  coal.  "Gas  and  electric  fixtures" 
is  an  industry  covering  the  entire  fifty  years,  and  includes  also 
the  growth  of  electric  lighting ;  yet  it  shows  a  rate  of  growth  only 
slightly  exceeding  the  average. 

The  general  road-vehicle  industry,  too,  including  the  develop- 
ment of  automobiles  up  to  1909,  is  surprising  in  that  it  has  not 
kept  up  with  the  general  average. 

Commercialism's  Unparalleled  Rate  of  Growth. — It  is  in 
contrast  with  such  industries  as  these,  popularly  supposed  to  be 
without  parallel  in  recent  growth,  that  the  still  more  rapid 
growth  of  those  things  which  are  peculiar  to  commercialism 
appears  in  its  proper  light.  Whereas  manufacture  as  a  whole 
has  grown  since  1850  by  only  427  per  cent,  commercialism  as  a 
whole,  as  shown  by  Tables  45  and  47,  has  grown  by  some  eight 
hundred  or  one  thousand  per  cent.  Particular  industries  which 
reveal  especially  the  effect  of  commercialistic  influences,  such  as 


520  MODERN    ECONOMIC    TENDENCIES 

wooden  or  paper  packing-boxes,  or  women's  clothing,  exhibit  a 
growth  of  from  thirteen  to  eighteen  hundred  per  cent ! 

The  manufactures  listed  in  Table  61  are  substantially  all  of 
those  appearing  in  the  census-reports  which  show  a  rate  of 
growth  faster  than  the  average — except  those  which  were  first 
introduced  after  1869,  and  which  are  therefore  incapable  of 
expression  in  the  form  of  a  ratio.  But  this  general  average  for 
all  manufactures,  it  must  be  remembered,  includes  these  later 
novelties,  which  of  course  have  embodied  the  highest  rates  of 
growth  of  all,  as  well  as  the  more  slowly  growing  items. 

For  any  particular  industry  which  has  been  continuous  since 
1850,  therefore,  to  have  grown  as  fast  as  this  average  for  all 
industries  means  that  it  has  grown  at  a  rate  far  beyond  that  of 
all  permanent  industries.  Its  rate  parallels  that  of  all  the  other 
permanent  industries  averaged  in  with  those  novelties  which 
have  appeared  since  1850  and  whose  rate,  stated  mathematically, 
must  be  infinite. 

The  Modern  Efflorescence  of  Commercialism. — Yet  com- 
mercialism— mere  buying  and  sellings  things  which  are  not 
wanted  for  consumption  by  the  buyer,  and  bargaining,  and 
exacting  interest — is  one  of  the  oldest  institutions  known  to 
man.  The  oldest  known  human  writings  are  concerned  chiefly 
with  its  records.  Hence  to  have  it  now  burst  forth  upon  us  with 
the  exuberance  of  youth,  as  an  ancient  custom  drinking  renewed 
vitality  at  the  fountain  of  modern  invention,  and  to  find  it  grow- 
ing upon  us  at  a  rate  exceeding  even  those  things  born  since 
1850,  is  a  fact  to  make  every  serious  student  of  present  progress 
pause  for  most  careful  reflection. 

Ethics  and  Social  Evolution. — The  significant  fact  proven 
by  all  this  recent  acceleration  of  the  growth  of  commercialism 
is  that  we  are  not  curing  our  economic  ills  gradually,  by  our 
cultivation  of  the  arts,  sciences  and  ethics,  as  is  so  commonly 
alleged.  The  world  is  daily  becoming  more  discontented  simply 
because  the  wrongs  which  disturb  it  are  growing  upon  us — with 
science  and  ethics  both  impotent  to  help  us  because  neither 
science  nor  ethics  has  been  able  even  to  identify  the  cause  of  the 
hurt,  let  alone  cure  it. 

Nor  are  we  curing  our  economic  ills  by  our  increasingly 
radical  and  vehement  protests  in  the  fields  of  politics,  economics 
and  the  humanities.  For  the  figures  all  show  that  we  are  to-day 
becoming  enslaved  to  commercialism  at  a  rate  more  rapid  than 


INDIRECT  LIGHT  UPON  THE   GROWTH   OF   COMMERCIALISM      521 

ever  before  in  our  history.  In  spite  of  the  fact  that  we  now 
possess  universities,,  scientific  schools,  forums,  civic  clubs  and 
sociological  societies  to  a  degree  unequaled  in  our  past  history, 
yet  all  the  forces — all  the  migration  of  humanity  from  pro- 
duction to  commercial  combat,  all  the  relentless  accumulation  of 
interest-bearing  securities,  all  the  multiplication  of  new  busi- 
nesses, and  all  the  resultant  subconscious  wastes,  antagonism, 
brakes  and  shackles — which  are  creating  the  social  problem 
about  us,  are  measurably  more  powerful  and  active  to-day  than 
ever.  Indeed,  these  various  futile  protests  grow  only  in  response 
to  this  accelerating  commercialism,  as  their  helpless  consequence, 
and  not  at  all  as  a  leading  or  dominant  control  over  commercial- 
ism. 

Indicators. — Take  as  an  indicator  of  the  growth  of  com- 
mercialism the  increase  in  inter-communication.  It  cannot  be 
urged  that  this  is  merely  an  indication  of  our  growth  in  the 
circulation  of  useful  intelligence.  On  the  contrary,  it  is  all  too 
common  knowledge  that  the  bulk  of  all  mail-matter,  the  great 
majority  of  all  telegrams  and  an  overwhelming  volume  of  tele- 
phone-messages are  used  for  purely  combative  commercial  pur- 
poses. Without  denying  for  an  instant  the  incidental  influence 
of  postal,  telegraphic  and  telephonic  communication  as  a  help  in 
the  guidance  of  productive  industry,  general  intelligence  and 
domestic  comfort,  yet  it  is  insisted  that  this  function  is  obviously 
quite  minor,  and  not  major,  in  its  proportions. 

Compare,  for  instance,  the  use  of  the  telegraph  and  telephone 
by  the  scientific,  educational  or  technical  portions  of  the  com- 
munity, with  that  by  the  commercially  combative.  Compare  the 
amount  of  advertising  mail-matter  which  you  daily  throw  into 
the  waste-basket,  usually  unopened,  or  the  number  of  letters 
which  concern  merely  price  or  ownership,  with  those  bringing 
you  really  useful  messages.  Consider  those  which  support  your 
life  in  a  physical  or  ethical,  as  contrasted  with  a  commercial, 
sense.  Compare  the  space  in  your  periodicals  received  by  mail 
which  is  devoted  to  advertisements,  with  that  devoted  to  real 
news  of  crops,  inventions,  really  novel  manufactures,  literature, 
art  or  science. 

The  bulk  of  all  mail-matter  proceeds  from  business-offices,  is 
advertising  or  solicitous  or  diplomatic  or  hostile  in  its  character, 
and  finds  its  way  into  the  waste-basket ;  or  else  into  the  files  of 
gome  enterprise  whose  prime  function  is  to  annul  the  first 


522  MODERN  ECONOMIC  TENDENCIES 

named  one.  Telegrams  and  telephones  occur  chiefly  in  the 
commercial  district,  where  they  enter  the  offices  in  bunches, 
whereas  a  college-professor  almost  has  a  stroke  of  apoplexy  when 
he  receives  a  telegram.  Over  nine-tenths  of  all  mail-matter  is  a 
sheer  waste  of  paper,  ink,  intelligence  and  transportation ;  yet  in 
the  author's  estimated  "Total  p"  only  half  of  it  was  charged  as 
such. 

Yet  these  postal  facts,  as  indicators  of  the  growth  of  com- 
mercialism, cannot  easily  be  brought  out  in  statistical  truth. 
Comparison  between  first-class  and  third-class  mail,  for  instance, 
or  between  two-cent  and  one-cent  postage,  will  not  help ;  because 
the  commercialists  learned  long  ago  that  the  one-cent  letters 
usually  go  into  the  waste-basket  unopened,  whereas  at  least  a 
glance  is  bestowed  upon  the  two-cent  letters.  Wherefore  adver- 
tising-matter travels  increasingly  by  letter-postage — at  so  much 
the  greater  loss  to  the  Consumer. 

The  Time-factor  in  Social  Evolution.— For  all  these  rea- 
sons it  becomes  the  prime  lesson  of  this  book,  to  be  reiterated 
and  emphasized  at  every  possible  point,  that  there  is  no  feature 
nor  function  of  modern  civilization  which  has  grown  upon  us  so 
steadily  throughout  the  last  half-century,  nor  which  is  equally 
accelerating  that  growth  at  the  present  time,  with  commercial- 
ism. Hence  whatever  may  be  relied  upon,  in  the  philosophy  of 
any  particular  reader,  for  overcoming  and  curing  this  evil,  it 
must  be  set  going,  in  order  to  be  effective,  not  only  very  much 
faster,  and  with  greater  energy,  than  any  present  line  of  progress 
in  science,  art,  technology,  charity,  politics  or  even  manufacture, 
now  visible.  It  must  double  or  treble  that  maximum  rate  before 
it  may  boast  even  of  keeping  even  with  its  quarry,  to  say  nothing 
of  overtaking  and  reversing  it! 

Time,  time,  TIME — is  the  all-important  function  in  the  effect- 
iveness of  any  line  of  reform.  Whatever  remedy  does  not  proceed 
faster  than  the  disease  is  no  remedy  at  all.  It  is  worse  than 
nothing;  it  is  a  loss.  For  it  allows  the  situation  to  get  worse 
while  losing  us  our  present  opportunity  to  do  something  effective 
for  good.  There  is  nothing  more  mischievous  in  our  social 
activities  than  the  loss  of  time,  through  mistaken  zeal  in  the 
many  inadequate  reforms  now  before  the  public. 

In  all  this  we  are  not  being  aided  by  general  progress  in 
knowledge  and  ethics,  as  is  so  commonly  supposed.  These 
factors,  indeed,  are  busily  engaged  only  in  making  the  situation 


INDIRECT  LIGHT  UPON  THE  GROWTH   OF   COMMERCIALISM      523 

worse.  Just  as  international  militarism  has  been  expanded  by 
modern  invention  into  something  far  bigger  and  more  destruc- 
tive than  ever  before  known,  so  that  the  latest  war  is  always  the 
worst  in  history,  so  is  the  effect  of  technical  advance  upon  com- 
mercial militarism  quite  the  same.  Indeed,  it  is  just  as  our 
theological  universities  of  1850  have  been  melting  into  our 
schools  of  natural  science  and  technology  of  1920  that  the 
economic  problem  has  grown  into  a  menace  to  civilization  the 
magnitude  of  which  defies  the  intellect  and  appalls  the  imagina- 
tion. 

That,  indeed,  is  our  real  problem.  What  effective  remedial 
agent  can  we  bring  to  bear  upon  an  evil,  such  as  commercialism, 
which  has  appropriated,  absorbed  and  grown  upon  every  atom  of 
intellectual  advance  hitherto  accomplished  by  man?  We  cannot 
fight  fire  with  oil.  If  we  still  hope  to  overcome  by  pacific 
persuasion,  by  legislation,  or  by  gradual  reform  of  any  kind,  the 
most  gigantic,  rapid  and  energetic  of  all  modern  institutions  of 
progress- — commercialism — we  are  plainly  forced  to  rely  upon 
some  force  or  process  never  yet  suggested  nor  made  available. 
Therefore  the  responsibility  of  anyone  who  dares  to  cling  to  that 
unfounded  hope,  to  bring  forward  and  apply  such  novel  force 
or  policy,  is  a  very  heavy  one  indeed. 

For  every  line  or  policy  of  advance  hitherto  known  to  man  has 
had  for  its  effect  only  the  acceleration,  rather  than  the  arrest,  of' 
commercialism,  and  its  further  escape  beyond  our  control.  Every 
step  of  our  progress  in  science,  technology  or  even  ethics  is  now 
actually  absorbed  in  feeding  and  accelerating  the  growth  of 
commercialism,  rather  than  braking  or  starving  or  opposing  it' 
into  any  semblance  of  subjugation.  That  is  why,  indeed,  this 
ancient  institution,  which  we  have  had  with  us  since  the  earliest 
dawn  of  history,  has  only  recently  taken  on  this  sudden  leap  into 
the  dominating  institution  of  present  history — because  never 
before  in  history  have  we  had  a  parallel  supply  of  political  Zi&- 
erty,  technical  aids  and  popular  knowledge  upon  which  such 
growth  might  feed. 

He  who  cannot  grasp  the  significance  of  this  great  fact  has 
not  yet  taken  his  first  kindergarten  step  in  the  understanding 
of  the  problems  of  the  day. 


CHAPTER  XIX 

THE  COST  OF  LIVING 

VOLUMINOUS  and  puzzling  as  are  the  statistics  of  wages  in  their 
mass  of  detail,  those  of  the  prices  of  commodities  are  still  more 
so.  Hardly  any  topic  in  political  economy  has  received  more 
attention  than  prices.  Few  deserve  it  more.  For  the  whole 
question  of  the  contentedness  or  discontent  of  the  people  rests 
primarily  upon  this  basis. 

For  the  thing  of  vital  importance  to  the  ordinary  citizen  is  not 
the  wage  or  salary  itself,  as  measured  in  dollars,  but  its  purchas- 
ing-power. It  is  the  relation  of  wages  to  prices,  and  not  the 
absolute  position  of  either,  which  counts. 

Yet  it  is  queer  how  incomprehensible  to  the  average  intelligent 
workingman  or  socialist  seems  to  be  the  fact  that  wages  are  not 
paid  in  dollars,  but  in  food,  clothing,  etc.  Labor  presses  con- 
tinually for  a  higher  money-wage,  dissipating  enormous  amounts 
of  energy  and  time  in  organizing  itself  for  that  purpose,  quite 
dense  to  the  simple  fact  that  the  higher  are  wages,  in  general, 
the  less  they  buy. 

Startling  as  the  words  may  seem,  it  is  nevertheless  true  that 
labor  is  best  off  when  the  general  rate  of  wages  is  low ;  for  then 
they  buy  the  most.  When  the  clouds  of  the  ancient  conflict 
between  labor  and  capital  shall  have  finally  rolled  away  forever, 
in  an  ultimate  peace  which  secures  to  labor  the  full  value  of  what 
it  produces,  then  wages  will  surely  be  much  lower  than  they  are 
now ;  but  they  will  then  buy  much  more  than  now. 

The  question  of  the  cost  of  living  therefore  resolves  itself 
immediately  into  two  quite  distinct  and  independent  questions: 
First  the  preliminary  inquiry,  how  and  why  have  prices  varied 
absolutely  speaking?  Secondly,  what  is  the  relative  variation 
between  prices  and  wages,  or  vice  versa,  and  the  reason  ? 

A  first  inspection  of  the  information  available  as  to  prices 
leads  one  to  conclude,  with  Mulhall,  that  "wages  often  rise  when 
prices  fall,  and  vice  versa."  But  this  fact  is  soon  found  not  to 
represent  any  general  law,  but  merely  the  sensitiveness  of  the 
economic  situation  to  many  contending  forces,  which  sway  prices 

524 


THE   COST  OP  LIVING 


525 


back  and  forth  momentarily,  so  to  speak,  in  one  direction  or  the 
other. 

The  general  law  is  that  prices  always  rise  with,  and  faster 
than,  wages.  But  the  relative  adjustment  of  the  two  requires 
time,  and  before  it  can  be  accomplished  other  influences  often 
interfere  to  disguise  the  law.  But  they  can  never  annul  it.  In 
any  event,  the  first  task  must  be  to  set  forth  the  facts  as  to  the 
variations  of  prices  in  the  past,  as  a  basis  for  the  investigation  of 
causes. 

The  History  of  Prices. — Each  economist  who  takes  up  the 
problem  of  prices,  and  attempts  to  discover  some  satisfactory 
scale  by  which  to  measure  and  tabulate  their  variations,  expresses 
his  sense  of  the  impossibility  of  the  task.  The  data  may  be  never 
so  complete.  The  problem  is  to  classify  them ;  and  this  problem 
varies  with  each  different  object  in  view. 

For  instance,  the  prices  which  are  of  prime  interest  to  the 
Ultimate  Consumer  are  those  of  finished  and  delivered  food, 
clothing,  shelter  and  recreation.  Those  of  first  interest  to  the 
manufacturer,  on  the  other  hand,  are  the  prices  of  comparatively 
raw  materials,  such  as  lumber,  coal,  iron,  etc.,  or  of  raw  grain, 
wool,  cotton,  etc.  These  separate  classes  of  goods  do  not  always 
vary  in  price  together.  Thus  Mulhall  in  his  "History  of  Prices" 
(1885)  gives  the  data  appearing  in  Table  62. 

TABLE  62 

RELATIVE  VARIATION  IN  PRICES  OF  AGRICULTURAL  AND  MANUFACTURED 
COMMODITIES,  1841  TO  1884 


Year 

Agriculture 

Manufactures 

1841-1850                   

100 

100 

1851-1860       

116 

91 

1861-1870 

121 

99 

1871-1880 

117 

92 

1881-1884  

111 

75 

The  Price-Index. — But  if  one  is  to  gage  accurately  the  vary- 
ing welfare  of  the  Ultimate  Consumer  he  must  have  some  index 
of  the  varying  price  of  the  aggregate  of  that  Consumer's  pur- 
chases ;  and  the  list  of  commodities  bought  of  course  varies  with 
each  class  of  Consumer.  Even  if  the  attempt  be  made  to  lump 
all  Consumers  together,  by  averaging  the  prices  of  many  com- 
modities into  a  single  index-number,  difficulty  still  arises.  A 


526  MODERN   ECONOMIC   TENDENCIES 

whole  literature  exists  upon  the  question:  "What  is  an  index- 
number/'  or  "what  should  it  be  ?" 

Mulhall,  for  instance,  objects  strenuously  to  the  "unweighted" 
averaging  of  prices,  pointing  out  pertinently  that  a  drop  of  ten 
per  cent  in  price  of  wheat  and  a  simultaneous  rise  of  ten  per  cent 
in  price  of  pepper  cannot  be  taken  as  offsetting  each  other,  as  in 
an  average,  to  show  unchanged  welfare  of  the  Ultimate  Con- 
sumer. But  if  the  prices  are  to  be  weighted  in  averaging,  how 
do  it?  Mulhall  weights  them  in  terms  of  the  volume  of  trade 
through  the  custom-house;  but  this  seems  equally  far  from  the 
point,  since  the  imports  and  exports  are  no  measure  of  the  vol- 
ume of  home-consumption,  which  is  the  thing  of  importance. 

Most  of  the  statisticians  openly  dodge  the  issue,  by  recognizing 
the  limitations  of  the  unweighted  index,  yet  accepting  it  as  the 
best  measure  available;  and  in  this  the  author  will  follow  them, 
since  there  is  no  pretense  here  of  adducing  anything  original  in 
the  statistics  of  prices.  If  one  looks  at  the  problem  sufficiently 
broadly,  covering  enough  time  at  a  glance,  attending  only  to 
major  issues  and  not  expecting  too  great  accuracy  in  detail, 
certainly  some  broad-  conclusions  which  are  not  now  generally 
recognized  may  be  reached  with  safety. 

As  a  foundation  for  such  an  analysis  Table  63  presents  index- 
numbers  showing  the  relative  variation  of  wages  and  prices  in 
parallel,  all  based  upon  100  for  the  year  1900  as  a  standard  of 
comparison.  The  index  of  wages  is  taken  from  Fig.  2  of  this 
work.  Those  for  prices  are  drawn  from  various  authorities  as 
follows : 

Column  2:  English  Prices:  Layton:1  "The  study  of  Prices," 

quoting  Jevons  &   Sauerbeck's 
index-number ; 

«       3:        "  "      Mulhall:  "The  History  of  Prices"; 

4 :  "       Layton,  quoting  the  London  Econ- 

omist; 

«       5:        "  "      Fisher:2  "The  Rate  of  Interest"; 

"       6:  German 
7:  French 

"       8:  American      " 
"9:  "      Aldrich  Report; 

"      10:         "  "       Bradstreet's  Journal. 

^Professor  at  Cambridge,  England,  and  University  College,  London, 
zprofessor  at  Yale. 


THE   COST   OF  LIVING 


527 


Table  63,  admittedly  questionable  in  its  basis,  yet  composed  of 
the  best  materials  available,  stands  as  a  symbol  of  the  worth  and 
unworth  of  certain  sorts  of  statistics.  Its  prime  value  must  be 
found,  if  anywhere,  in  Column  11,  giving  the  ratio  of  price- 
index  to  wage-index. 

TABLE  63 
RELATIVE  VARIATION  IN  WAGES  AND  PRICES,  1800  to  1915  (1900  =  100) 


Period 

I 

Prices 

Ratio  of 
Prices  to 
Wages 

English 

Ger. 

French 

American 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

1800-1805 
1806-1810 
1811-1815 
1816-1820 
1821-1825 
1826-1830 
1831-1835 
1836-1840 
1841-1845 
1846-1850 
1851-1855 
1856-1860 
1861-1865 
1866-1870 
1871-1875 
1876-1880 
1881-1885 
1886-1890 
1891-1895 
1896-1900 
1901-1905 
1906-1910 
1911-1915 

69 
74 
78 
77 
73 
70 
67 
64 
65 
69 
74 
79 
84 
78 
93 
95 
93 
91 
92 
97 
103 
108 
118 

213 
235 
199 
185 
154 
140 
131 
144 
125 
116 
122 
133 
136 
132 
138 
119 
106 
95 
89 
87 
93 
102 

194 
195 
132 
124 
112 
117 
124 

118 
106 

(English) 
3.00 

2.40 

1.99 

2.03 
(American) 
1.49 
1.42 
1.51 
1.48 
1.50 
2.02 
.48 
.23 
.22 
.13 
.02 
0.91 
0.99 
1.02 
1.03 

ioo 

108 
123 
157 
124 
129 
112 
101 
99 
93 
91 
102 
108 

154 
135 
125 
139 
120 
112 
121 
131 
136 
132 
137 
119 
107 
94 
86 
88 
93 
103 

97 
98 
112 
117 
132 
180 
142 
117 
113 
103 
93 
89 
103 
112 

102 
110 
112 
112 
121 
112 
107 
95 
91 
90 
94 

'136' 
116 
112 
86 
84 
87 

'126' 
135 
134 
114 
114 
103 
93 
88 
103 
114 

"94 
86 
100 
107 
122 

The  absolute  value  of  this  ratio,  at  any  one  time,  of  course 
indicates  nothing.  But  the  variation  of  this  ratio  with  time 
should  certainly  follow  and  reveal  the  known  variations  in 
economic  contentedness  among  the  working  classes.  To  a  degree 
it  does  this;  but  there  are  lacks. 

The  table  opens  just  before  the  zenith  of  the  stormy  Napo- 
leonic era,  when  prices  were  higher  than  ever  since,  and  wages 
were  the  highest  for  a  quarter-century  before  or  after.  So  it  is 
not  surprising  to  find  the  ratio  of  Column  11  at  its  highest  value 
at  this  time. 

But  from  that  date  forward  relative  peace  reigned  over  both 
Europe  and  America,  and  its  natural  influence  upon  prices  and 
ease  of  living  is  visible  in  the  continuous  drop  of  the  ratio  until 
about  the  year  1850.  From  that  time  until  about  1870  war  held 


528  MODERN    ECONOMIC    TENDENCIES 

sway  in  both  continents,  with  the  result  that  within  the  twenty 
years  the  ratio  rose  from  1.42  to  2.02. 

Then  came  another  era  of  comparative  peace,  lasting  until 
almost  the  close  of  the  nineteenth  century,  resulting  in  a  drop 
of  the  ratio  to  0.91.  Since  that  time  both  martial  war  and  com- 
mercial combat  have  been  in  the  ascendancy,  and  the  ratio  has 
risen  in  consequence  to  1.03,  or  by  13  per  cent  in  fifteen  years. 

General  Principles  of  Price-Determination. — But  before 
these  relationships  can  be  traced  in  proper  detail  we  must  pause 
to  review  briefly  the  factors  determinant  of  the  general  level  of 
prices — a  topic  now  more  widely  misunderstood  than  almost  any 
other  in  political  economy.  For  it  is  all  but  universally  assumed 
that  the  whole  question  rests  only  upon  the  law  of  supply  and 
demand — that  there  is  inherent  in  humanity  a  general  reluctance 
to  produce,  which  forces  supplies  down  and  prices  up  until  the 
higher  price  persuades  additional  productivity  to  come  into 
action.  Conversely  (it  is  supposed)  the  higher  price  is  always 
competent  to  force  into  action  the  desired  increase  in  produc- 
tivity. 

It  is  puzzling  to  the  author  to  understand  whence  arose  this 
simple  and  inadequate  theory  of  prices.  There  is  certainly  not 
an  atom  of  support  for  it  in  our  general  statistical  data.  There 
is  very  little  even  in  the  vague  surmises  of  daily  life.  For,  how- 
ever the  reader  may  have  observed  in  his  own  experience  a 
working  of  the  law  of  supply  and  demand,  to  determine  the 
price  of  any  one  commodity  in  which  he  happens  to  be  interested, 
in  comparison  with  other  commodities — as  of  the  price  of  cotton 
rising  while  that  of  bricks  is  falling — any  study  of  the  general 
level  of  prices  will  force  out  of  one  the  last  vestige  of  reliance 
upon  supply  and  demand  as  their  determinant.  The  whole 
economic  history  of  America  forces  one  to  the  conclusion  that 
either  there  is  no  such  law,  or  else  that  some  superior  force  has 
annulled  its  free  operation. 

If  so,  what  are  the  major  forces  which  determine  the  general 
level  of  prices  of  all  commodities,  averaged  together  ? 

Let  us  first  debate  the  distinction  between  what  we  may  call 
the  internal  factors  controlling  prices — that  is  to  say,  those 
operative  within  the  organization  which  publishes  any  given 
price  to  the  world — and  those  factors  which  are  external  to  that 
organization,  and  which  coerce  it.  These  internal  factors  are 
listed  in  Table  64. 


THE   COST  OF  LIVING  529 

It  is  obvious  from  Table  64  that,  in  the  determination  of  the 
general  price-level  prevailing  at  any  given  time,  and  particularly 
in  the  progress  of  prices  with  time,  there  is  a  certain  degree  of 
"working  in  a  circle"  between  these  internal  factors  and  the 
external  ones — a  mutual  reaction  between  the  price  of  each 
single  commodity  and  all  the  rest.  That  is  to  say,  high  prices 
beget  high  prices,  and  vice  versa. 

TABLE  64 
THE  INTERNAL  FACTORS  IN  PRICE  DETERMINATION 

f  (1)  Plant  and  Materials; 

(A)  Productive  Costs:      ]   (2)  Wages    and    Salaries  of    Pro- 
ducers 


(B)  Commercial  Costs: 


(3)  Interest,  Dividends,  Rent,  etc.; 

(4)  Salaries  of  Commercial  Com- 

batants and  the  Wages  of 
their  Aides; 

(5)  Costs  of  Selling; 

(6)  Surplus. 


Total Prices 

This  much  is  now  commonly  understood ;  but  it  does  not  solve 
the  riddle.  What  still  remains  to  be  explained  is :  What  are  the 
forces,  and  where  within  this  magic  circle  do  they  originate, 
which  leads  at  one  time  to  the  begetting  ~by  high  prices  of  still 
higher  prices,  and  at  another  time  to  the  begetting  by  low  prices 
of  still  lower  ones  ? 

Now  that  every  commercialist  is  explaining  his  prices  as 
forced  upon  him  by  someone  else's  prices,  it  is  not  as  clearly 
understood  as  it  should  be  that  any  factor,  in  order  to  be  com- 
petent to  raise  prices  already  high,  or  to  depress  prices  already 
low,  must  be  something  aside  from  and  independent  of  the  mere 
effect  of  prices  upon  prices.  That  reaction  certainly  can  tend 
neither  to  raise  nor  depress  prices.  Indeed,  it  is,  even  to-day, 
our  greatest  stabilizer  of  prices. 

Indeed,  what  is  not  properly  understood  to-day  is  that  it  is 
the  operation  of  this  very  stabilizing  effect  of  prices  upon  prices 
which  prevents,  in  co-operation  with  other  natural,  biologic  coun- 
terbalances, the  spasmodic  elevation  or  depression  of  prices  by 
mere  individual  whim  or  greed.  For  the  occurrence  of  such 
individual  peculiarities  is  always  sporadic;  and  for  centuries  we 


530  MODERN  ECONOMIC  TENDENCIES 

have  had  at  work  nature's  counterbalances  to  individual  idio- 
syncrasies. 

Nor  may  we  sweep  the  topic  easily  aside  by  saying  that  the 
raising  of  prices  may  become  epidemic,  by  mob-action.  That  is 
no  answer,  because  men  have  always  been  greedy  to  raise  prices. 
Why,  in  the  face  of  that  eternal  fact,  has  history  recorded 
periods  when  whatever  epidemic  action  was  at  work  led  to  a 
universal  reduction  of  prices,  and  other  periods,  as  the  present 
one,  when  it  has  led  to  the  exact  opposite  ?  For,  in  past  history, 
prices  have  fallen  as  many  times  as  they  have  risen. 

What  we  must  find  to-day,  before  we  may  pretend  to  ourselves 
that  we  understand  the  political  economy  of  prices,  is  some  factor 
sufficiently  powerful  and  non-individual  to  be  able  to  defy  all 
these  natural,  stabilizing  counterbalances  to  individual  peculiari- 
ties, over  wide  stretches  of  territory  and  population  simul- 
taneously, and  sufficiently  primal  to  be  able  to  originate,  in  the 
face  of  all  these  tendencies  of  prices  to  remain  fixed,  a  motive 
force  adequate  to  set  in  motion  an  entire  civilization. 

Therefore  it  is  of  the  utmost  importance  that  we  examine 
carefully  this  distinction  between  these  two  sorts  of  factor  in 
price-determination — the  external  and  the  internal — in  order  to 
discern  clearly  primal  action  from  mere  reaction.  We  must 
carefully  avoid  jumping  at  conclusions.  The  wisdom  or  futility 
of  much  of  our  crusade  against  high  prices  depends  upon  this. 

The  Effect  of  Prices  upon  Prices.— Table  64  supplies  us 
with  our  first  material  for  a  clear  understanding  of  price-factors. 
It  divides  the  internal  factors  into  two  main  classes — productive 
costs  and  commercial  costs  respectively — subdivides  these  main 
classes  into  six  subclasses,  and  then  localizes  among  these  sub- 
classes the  field  of  reaction  of  prices  upon  prices.  The  habitat 
of  the  "vicious  circle"  in  prices  then  is  defined  by  the  arrows. 

Thus,  taking  up  the  subclasses  seriatim,  it  is  plain  that  the 
price  of  raw  material  must  rise  with  the  prices  of  factory- 
output,  and  vice  versa;  for  what  is  one  factory's  output  is  the 
next  factory's  raw  material.  If  a  factory  discharges  only  par- 
tially completed  commodities,  which  serve  directly  as  the  raw 
material  for  the  next  step  in  their  transformation  into  life- 
support,  then  this  relationship  is  direct  and  obvious.  If  the 
factory's  output  be  stuff  finished  for  ultimate  consumption,  then 
this  influence  is  less  direct — taking  effect  only  through  the  inter- 


THE   COST   OF   LIVING  531 

mediaries  first  of  cost  of  living,  and  then  of  wages — but  it  is  none 
the  less  certain  for  that  fact. 

Thus,  eliminating  for  the  moment  all  questions  of  external 
factors  which  may  affect  the  price-influence  during  its  traversal 
of  the  path  of  the  arrows  in  Table  64,  and  all  question  of  delay 
or  "lag"  involved  in  this  transit,  it  becomes  plain  that  prices 
themselves  can  neither  elevate  nor  depress  the  purchasing-power 
of  wages  in  general,  and  hence  the  general  contentedness  or  dis- 
content of  the  people.  Prices  may  be  high  or  low.  If  nothing 
else  has  altered,  wages  and  salaries  will  have  gone  with  them, 
and  purchasing-powers  have  remained  undisturbed.  However 
wages  may  have  risen  or  fallen,  the  only  true  wage — that  in 
terms  of  life-supporting  commodities — has  remained  unaltered. 

So  much  for  the  effect  of  prices  upon  the  purchasing-power 
of  wages. 

The  Effect  of  Wages  upon  Prices.— Now  being  a  period 
when  both  wages  and  prices  are  rising  rapidly — wages  being 
forced  upwards  by  drastic,  uncomfortable  strikes,  and  prices  by 
forces  no  less  tyrannous  and  brutal  because  better  cloaked — 
it  is  common  to  aver  that  prices  are  being  forced  upwards  by  the 
rise  in  wages.  Not  only  has  this  doctrine  already  been  disposed 
of,  by  our  observation  that  there  is  no  motive  power  in  this 
simple  reaction  of  lifting  oneself  by  one's  boot-straps;  but  there 
is  a  twofold  reply  to  it  in  addition. 

First,  our  statistical  tables  show  that  the  commercial  interests 
of  the  country,  taken  as  a  whole,  are  to-day  paying  out  a 
smaller  fraction  of  their  gross  income  in  productive  wages  than 
ever  before  in  our  history;  wherefore  the  wage-argument,  so  far 
as  it  may  have  any  force  at  all,  must  find  expression  in  a  gradual 
depression  of  prices.  They  are  not  conscious  of  this  fact,  because 
they  think  that  all  the  wages  they  pay  are  productive.  But  the 
real  trouble  is  that  more  and  more  of  the  wages  they  pay  are  non- 
productive wages,  paid  to  those  whom  they  hire  to  help  them 
fight. 

Secondly,  as  wages  and  prices  have  risen  together,  of  late, 
prices  have  always  risen  faster  than  wages. 

Thus,  for  an  instance  of  the  latter  fact  which  has  been  staring 
us  New  Yorkers  in  the  face  as  we  rode  (for  no  one  can  afford  to 
run  nowadays)  the  bulletins  published  during  the  first  half  of 
1919  by  Mr.  Theodore  Shonts,  president  of  New  York  City 
transit-corporations,  and  exhibited  in  the  cars  as  arguments  for 


532  MODERN  ECONOMIC  TENDENCIES 

the  increase  in  fares,  stated  that  the  average  wage  paid  by  these 
corporations  had  risen  during  the  war  by  62  per  cent.  Yet  in 
other  issues  of  these  same  bulletins  it  was  stated  that  the  price  of 
coal  had  risen  during  the  same  period  by  83  per  cent,  and  general 
supplies  by  over  100  per  cent.  The  sympathy  and  confidence  of 
the  public  was  alienated,  as  always  in  these  blundering  efforts  of 
the  corporations  at  educating  the  people,  by  the  failure  to  put 
all  these  cogently  interesting  facts  side  by  side,  in  the  same 
bulletin ;  to  show  that,  as  always  under  rising  prices,  prices  have 
risen  faster  than  wages,  so  that  the  pur  chasing -power  of  the  wage 
was  least  when  the  wage  was  highest. 

As  wages  have  risen  their  purchasing-power  has  fallen.  There 
can  be  no  understanding  of  the  problem  of  prices  until  this  basic, 
cogent  fact  has  been  grasped.  Neither  the  strike  nor  any  other 
weapon  in  the  hands  of  labor  has  ever  yet  accomplished,  nor  can 
ever  hope  to  accomplish,  any  elevation  of  purchasing-power 
relatively  to  average  income.  The  price  insists  upon  rising  faster 
than  the  rising  wage. 

Every  strike,  whether  it  wins  or  loses  in  the  momentary  sense, 
always  loses  in  the  end,  by  raising  prices  and  depressing  purchas- 
ing-power. The  history  of  recent  decades  has  been  just  this — 
wages  higher  than  ever  before  in  a  century,  yet  labor  steadily 
becoming  more  discontented.  The  commercialists  say  that  this 
discontent  is  an  unreasonable  whim.  Labor  says  that  it  is  a 
natural  and  inevitable  sentiment,  because  the  wage  is  insufficient. 
The  truth  is  that  it  is  natural  and  inevitable,  not  because  the 
wage  is  too  low  but  because  the  price  is  too  high,  in  all  com- 
modities, the  world  over. 

The  commercialists,  while  the  ablest  at  raising  prices,  are  not 
the  only  ones  who  do  it.  Labor  helps,  in  so  far  as  it  is  able. 
Every  strike  raises  prices.  If  it  loses,  it  raises  prices  merely  by 
the  cost  of  the  strike.  If  it  wins,  it  raises  prices  by  the  cost  of 
the  strike  plus  the  higher  wage,  plus  a  margin  charged  by  the 
employer  for  collecting  this  higher  wage  from  other  workingmen. 
For  all  wages,  whether  high  or  low,  are  paid  by  producers  in 
their  function  of  Ultimate  Consumers.  There  is  no  other  source 
for  them. 

The  commercialists  are  the  only  ones  who  truly  raise  prices, 
because  labor's  demands  for  a  higher  wage  are  enforced  by  the 
rising  cost  of  living.  But  the  commercialists  comprise  the  one 
class  which  does  not  pay  either  the  higher  price  or  the  higher 


THE   COST   OF   LIVING  533 

wage.  It  does  not  pay  the  higher  wage,  in  effect,  because  its 
income  rises  faster  than  the  wage  paid.  As  for  the  price,  it 
receives  it,  not  pays  it.  It  is  labor  alone  which  pays  all  in- 
crease in  wages,  in  the  form  of  higher  prices  paid  for  everything. 

Economic  Lag. — Whenever  wages  react  upon  prices,  or  prices 
react  upon  prices  through  wages,  the  effect  is  always  delayed 
somewhat  in  time,  and  always  exaggerated  in  amount.  Both 
facts  disguise  the  simple  truth,  into  an  apparently  intricate 
obscurity  which  frightens  many  minds. 

The  delay  in  time  is  due  to  our  lack  of  any  means  for  adjust- 
ing wages,  prices,  demands,  or  any  other  economic  factor,  in  a 
prompt,  systematic,  rational,  national  manner.  We  leave  every- 
thing to  haphazard  bargaining  between  private,  irresponsible 
individuals — and  then  wonder  why  turmoil  results,  or  else  blame 
somebody's  else's  lack  of  Christian  character  for  the  fruit  of  our 
own  stupid  laziness ! 

The  exaggeration  in  amount  is  due  to  the  various  commercial 
charges  attached  to  the  collection  of  the  larger  margins  from 
many  individuals  scattered  throughout  the  land,  through  the 
employers  and  shop-keepers  as  collection-agents.  We  treat  our 
collection  of  economic  strength  from  the  public  in  the  same 
irresponsible  manner  as  ancient  nations  treated  their  collections 
of  governmental  support,  by  leaving  it  to  private,  irresponsible 
tax-gatherers,  who  were  rewarded  with  whatever  margin  of  profit 
they  could  succeed  in  collecting  above  the  demands  of  the  govern- 
ment above  them. 

This  was  a  method  already  discredited  in  the  minds  of  all 
good  men  when  the  New  Testament  was  written.  The  most 
scurrilous  thing  said  about  Jesus  was  that  he  consorted  with 
publicans — the  profit-paid  tax-gatherers  of  that  day.  Yet  we 
wonder  why  the  modern  construction  of  our  entire  civilization 
upon  the  principle  and  policy  of  the  Judean  publican  results  in 
rising  prices,  dropping  production  and  increasing  unrest ! 

The  Ultimate  Consumer  the  Sole  Source  of  Wealth.— 
For  both  the  wage-earner  and  the  public  sorely  need  to  learn, 
before  they  can  understand  such  simple  problems  as  prices, 
strikes,  etc.,  that  the  employer,  even  if  he  be  a  producer  (which 
usually  he  is  not),  is  not  in  any  way  a  source  of  wealth.  He  is 
a  mere  agent — an  agent  for  the  finding  of  labor  to  fill  the  de- 
mands of  the  Ultimate  Consumer — an  agent  for  the  distribu- 
tion to  labor  of  the  wealth  collected  from  the  Ultimate  Con- 


534  MODERN   ECONOMIC   TENDENCIES 

sumer.  He  neither  makes  jobs  nor  provides  money;  nor,  in  his 
function  of  profit-maker,  even  produces  supplies.  Even  if  he 
be  a  producer,  he  contributes  to  labor  not  when  he  hires,  but 
when,  in  company  with  the  millions,  he  buys  FOR  PERSONAL, 

ULTIMATE    CONSUMPTION. 

The  employer,  as  such,  is  purely  an  intermediary.  Not  a 
dollar  of  the  steady  increase  in  wages  throughout  the  last  seventy- 
five  years  has  come  out  of  his  pocket.  Not  a  dollar  of  the 
steady  rise  in  prices  during  the  last  twenty-five  years  has  gone 
through  his  hands  to  reach  productive  labor,  without  those  hands 
having  been  enriched  thereby.  The  impressive  prosperity  of  the 
employer-class,  unexampled  by  any  precedent  in  history  (save 
those  which  have  ended  in  revolution),  stands  in  irrefutable 
support  of  this  statement. 

Technical  Education  and  Prices.— Again,  so  far  as  im- 
provement in  either  the  appliances  or  the  average  intelligence 
of  our  national  factory-force,  through  progress  in  science  and 
popular  technique,  is  concerned,  it  is  obvious  that  this  factor,  by 
its  improvement  in  our  mechanical  efficiency,  can  have  the  effect 
only  of  lowering  prices.  Yet  it  will  do  this  without  depressing 
wages,  which  will  rise  because  the  producer  is  producing  more. 
It  therefore  must  increase  the  purchasing-power  of  the  wage. 

But,  since  the  last  quarter-century  has  been  unquestionably 
a  period  of  progress  in  technology  such  as  never  before  occurred 
in  history,  yet  this  factor  of  advance  in  intelligence  must  be 
dismissed  promptly  from  consideration,  as  plainly  overruled  by 
some  force  far  greater  than  itself.  Indeed,  our  prime  problem  in 
technical  science  itself  is  to  explain  prices  rising  universally,  at 
a  rate  unknown  since  Napoleonic  times,  in  the  face  of  mar- 
velously  reduced  technical,  factory-system  costs  of  production. 

Commercialism  Indicted  by  Elimination  of  Other  Fac- 
tors.— Thus  it  becomes  obvious  from  Table  64,  by  the  mere 
process  of  elimination,  that  the  retroactive  effect  of  prices  upon 
prices  must  be  confined  to  the  productive  costs  involved.  It  can 
have  no  influence  over  any  of  the  commercial  factors  involved, 
because  neither  interest,  dividends  nor  rent  can  be  truly  affected, 
in  any  legitimate  way,  by  any  current  rise  in  prices  of  materials 
or  labor;  for  interest,  dividends  and  rent  rest  upon  neither  the 
consumption  of  materials  nor  the  exertions  of  labor.3 

sit  is  a  too  familiar  contention  on  the  part  of  the  landlords,  during 
this  winter  of  1919-20,  that  rents  must  rise  because  prices  and  wages 


THE  COST  OF  LIVING  535 

According  to  Professor  Fisher's  law,  interest,  dividends  and 
rent  are  the  determinants  of  rising  valuations,  and  not  their 
resultants.  It  was  stated  plainly,  in  the  chapters  upon  Interest, 
what  we  believed  dividends  and  rent  did  depend  upon.  Here  our 
duty  is  confined  to  showing  that  they  do  not  depend  upon  prices. 

Surplus,  for  its  part,  is  quite  aside  and  independent,  deter- 
mined by  no  other  factors  whatever  than  the  ability  of  the  com- 
mercialists  to  collect  it. 

As  to  the  salaries,  wages  and  costs  involved  in  selling,  while 
these  must  rise  per  person  with  rising  prices,  yet  the  relative 
number  of  persons  involved  in  selling,  and  their  relative  caliber, 
is — nominally  and  apparently,  at  least — within  the  personal  con- 
trol of  the  commercialist.  He  cannot  alter  appreciably  the  out- 
put per  dollar  of  productive  wages ;  only  the  technician  and  the 
superintendent  can  do  that.  But  the  commercialist  can,  and 
commonly  does,  alter  widely  both  the  membership  and  the 
caliber  of  his  selling-force,  per  unit  of  output.'  It  is  this  which 
is  now  the  chief  factor  in  rising  prices. 

The  commercialist  may  vary  the  personnel  of  his  selling-force, 
either  in  numbers  or  caliber,  in  proportion  to  his  producers.  He 
may  assume  greater  costs  for  advertising  (while  his  competitor 
does  the  same).  He  may  incur  larger  financial  charges.  He 
may  insist  upon  a  more  rapid  accumulation  of  surplus. 

He  may  be  able  to  expand  these  items  so  that  he  himself 
pockets  the  gain  from  the  higher  prices.  He  may  be  so  harassed 
by  competition  that  these  items  are  expanded  without  enriching 
him.  He  may  even  become  bankrupted  thereby.  But  none  of 
these  considerations  has  any  bearing  upon  the  fact  that  it  is  these 
commercial  factors  alone  which  can  elevate  prices  relatively  to 
incomes ;  for  no  mere  rise  in  wages  can  accomplish  more  than  to 
raise  prices  and  incomes  simultaneously,  thus  leaving  purchas- 
ing-powers unaltered. 

Nor  have  any  of  these  doubts  as  to  the  prosperity  of  the  com- 
mercialist any  bearing  upon  the  hardship  of  the  Ultimate  Con- 
sumer. The  Ultimate  Consumer,  when  oppressed  by  high  prices 
has  no  alternative  than  to  pay  them;  whereas  the  commercialist, 

are  rising.  So  far  as  the  landlord  pays  costs  of  depreciation  and  wages 
to  labor,  this  is  true.  But  true  rent  begins  only  after  these  things  have 
been  disposed  of.  We  continue  to  be  duped  by  the  landlords  only  because 
we  are  content  to  remain  muddled  as  to  elementary  definitions  in 
political  economy. 


536  MODERN   ECONOMIC   TENDENCIES 

at  any  time  that  he  may  find  his  function  a  hardship,  may  always 
leave  it  and  return  to  the  productive  ranks. 

Above  all  debate  stands  the  fact  that,  for  seven  or  eight 
decades  past,  there  has  been  a  relentless  migration  in  the  op- 
posite direction — out  of  production  and  into  commercialism — 
because  the  latter  pays  better.  Deeds  talk  louder  than  words. 

Automatic  Involuntariness  Again. — As  was  said  above,  It  is 
apparently  a  matter  of  free  choice  with  each  seller  whether  he 
shall  expand  his  selling-efforts  or  not.  Such  is  the  common 
belief.  Actually,  however,  the  seller  is  rigorously  coerced  in  all 
these  matters,  by  such  factors  as  population,  transportative  and 
communicative  facilities,  etc.,  which  are  constantly  expanding, 
and  which  lie  wholly  outside  his  control.  The  whole  energy  of 
modern  inventive  progress  is  now  engaged  in  forcing  him  into  a 
continual  expansion  of  his  non-productive,  combative  disburse- 
ment of  wages,  as  well  as  of  his  financial  costs  and  his  personal 
profits. 

Prices  fixed  by  Commercial,  not  by  Productive,  Factors. — 
But  the  point  of  interest  to  us  at  present  is  not  whether  these 
are  matters  of  free  will  or  not,  but  whether  prices  are  fixed  by 
commercial  rather  than  productive  costs,  or  not.  Our  important 
task  is  to  make  it  clear  that,  however  this  retroactive  effect  of 
prices  upon  prices  might  be  argued  as  including  some  of  the 
commercial  factors,  it  cannot,  even  then,  explain  continually 
rising  (or  falling)  prices.  Such  an  argument  is  like  a  man's 
effort  at  lifting  himself  by  pulling  on  his  own  boot-straps. 

Any  price-increment  once  embodied  in  "PRICES/'  at  the 
foot  of  Table  64,  must  transfer  itself,  following  the  arrows,  once 
around  the  circle;  but  no  more.  If  it  receives  no  increment 
between  top  and  bottom  of  the  table,  from  a  shift  of  personnel 
from  one  subclass  to  another,  then  it  must  come  out  as  it 
went  in. 

The  Secret  of  Rising  Prices. — The  complete  explanation  of 
modern  rising  prices  is  that  such  a  shift  has  been  occurring  upon 
a  gigantic  scale.  As  shown  by  our  tables  analyzing  the  census- 
reports,  there  has  been  a  continual,  irresistible  tide  of  migration 
from  the  productive  subclass  to  the  commercial  ones. 

We  need  no  explanation  so  foolish  as  any  boot-strap-lifting 
reaction  of  prices  upon  prices.  It  is  only  factors  3  to  6,  in  Table 
64,  which  are  capable  of  raising  prices  faster  than  wages,  if  at 
all,  and  thus  decreasing  the  people's  purchasing-power  and  in- 


THE   COST   OF   LIVING  537 

creasing  their  discontent.  Every  source  of  information  upon 
which  we  have  tried  to  draw  has  shown  that  these  factors  have 
been  increasing  steadily,  rapidly  and  acceleratingly  throughout 
the  last  seventy-five  years.  During  the  last  two  decades  this 
acceleration  has  been  marked. 

The  Effect  of  Gold-Supply  upon  Prices.— We  have  thus  seen 
that  high  prices,  in  themselves,  constitute  no  public  hardship; 
nor  do  low  wages.  If  there  be  no  dissipation  of  economic 
strength  due  to  subclasses  3  to  6,  high  prices  or  low  wages  would 
be  just  as  conductive  to  general  content  as  their  opposite,  because 
incomes  would  be  high  or  low  with  prices. 

Nevertheless,  it  is  of  secondary  interest  to  inquire  as  to  some 
of  the  factors  which  determine  general  levels  of  prices  and 
incomes,  even  if  they  have  no  bearing  upon  popular  contented- 
ness.  Indeed,  that  is  why  it  is  important  to  debate  them 
accurately  here;  for  the  public  is  now  wasting  invaluable  time 
and  effort,  while  Eome  burns,  in  discussion  of  many  factors 
which  are  quite  incompetent  and  irrelevant  to  the  question  of 
social  contentedness  and  stability. 

Thus,  when  we  consider  all  the  possible,  if  secondary,  factors 
which  may  affect  prices,  one  must  admit  the  increasing  ease  of 
gold-production  as  one  deserving  attention.  Yet  in  the  majority 
of  minds  the  significance  of  this  factor  is  grossly  exaggerated 
into  a  complete  sovereignty.  Care  must  therefore  be  taken  to 
give  it  its  proper  weight  and  place. 

In  the  first  place,  there  is  no  general  connection,  as  is  so  com- 
monly believed  between  the  aggregate  quantity  of  gold  on  hand 
and  the  price  of  other  commodities.  Even  the  price  of  gold  itself 
does  not  depend  upon  its  quantity  in  accumulation,  because  there 
is  no  current  consumption  of  gold.  The  quantity  of  gold  affects 
merely  the  stability  of  paper  or  other  toJcen-money  based  thereon. 
That  fact  was  made  clear  in  Chapter  V,  upon  Credit. 

The  price  of  gold  depends  solely  upon  the  labor  and  other 
cost  involved  in  its  production.  A  surplus  or  deficit  in  the 
world's  accumulation  of  gold  determines,  not  its  price,  but 
merely  the  amount  of  labor  which  must  temporarily  be  diverted 
away  from  other  occupations  into  gold-production,  to  make  good 
this  deficit,  or  the  reverse.  Momentarily  this  has  a  slight  effect 
in  fluctuating  prices,  but  this  is  only  to  the  degree  that  the  gold- 
deficit  bears  to  the  aggregate  of  all  production — always  an  in- 
significant, inappreciable  ratio. 


538  MODERN   ECONOMIC  TENDENCIES 

Permanently,  the  quantity  of  gold  has  no  influence  upon 
prices.  Too  little  gold  on  hand  means  not  a  high  price  for  gold, 
but  instability  of  circulating-medium.  It  is  ease  in  production 
of  gold,  and  not  quantity  on  hand,  which  tends  to  cause  high 
prices. 

It  is  a  parallel  statement  to  say  that  no  hoarding  of  gold  by 
the  "money-barons,"  nor  their  "monopoly  of  the  gold-market," 
has  any  untoward  influence  upon  prices.  These  people  do  harm 
enough  economically  in  other  ways,  as  detailed  in  this  book,  it  is 
true;  but  their  control  of  our  stock  of  gold  is  a  benefit,  not  a 
harm.  It  stabilizes  the  circulating  medium. 

The  money-people  want  that  because  without  it  they  cannot  do 
business  and  make  profits.  The  people  want  it  because  they  too 
want  business  done,  even  if  at  their  cost.  Until  we  get  a  better, 
non-commercial,  profitless  system  it  is  far  better  for  the  people 
to  have  business  done,  even  at  their  exploitation,  than  it  is  to 
have  "hard  times"  and  not  even  a  half -loaf  of  bread. 

To  those  who  feel  that  economic  ills  are  due  to  the  private 
ownership  of  our  stores  of  gold  it  will  be  acceded  promptly  that 
this  is  true — in  proper  proportion.  That  is  to  say,  gold  or 
any  other  standard  having  once  been  agreed  upon,  it  thereby 
becomes  an  essential  to  the  life  of  the  community.  The  private 
ownership  of  it  then  works  harm,  just  as  the  private  ownership 
of  any  other  essential  to  community-life,  whether  in  the  form 
of  tangible  appliances  or  intangible  opportunities,  works  harm. 

But  the  truth  goes  no  farther  than  this.  That  is  to  say,  it 
is  the  institution  of  ownership-in-industry,  we  shall  see,  which 
works  the  harm,  with  no  perceptible  difference  whether  that 
ownership  concerns  gold,  or  steel,  or  a  factory-site,  or  a  mailing- 
list,  or  a  drug-store. 

Theory  of  the  Relation  between  Prices  and  Gold  Supply.— 
Thus,  for  a  brief  statement  of  the  gold-theory,  let  us  imagine 
that  overnight  some  discovery  of  new  mines,  or  some  improve- 
ment in  the  process  of  extraction,  had  made  it  possible  to  pro- 
duce two  ounces  of  gold  with  the  same  labor  and  cost  previously 
required  for  one.  The  first  result  of  this  would  be  to  upset  all 
previous  conditions.  Many  people  would  rush  into  the  produc- 
tion of  gold. 

But  an  early  result  of  their  attempts  to  spend  this  easily 
acquired  supply  of  gold  would  be  to  double  all  prices — ostensibly 
and  temporarily  because  of  a  greater  demand  for  commodities, 


THE   COST  OF  LIVING  539 

but  really  because  the  cost  of  gold  had  been  halved.  For  the 
gold-diggers  would  soon  learn  that  their  labor  was  enriching 
them  no  faster  than  it  had  done  at  bench  or  plow,  and  would 
return  to  the  previous  vocations.  This  has  been  instanced 
repeatedly  in  the  history  of  gold-crazes. 

But  this  doubling  of  prices  should  cause  no  hardship  to  any- 
one, except  temporarily,  for  all  prices  would  be  affected  equally. 
Those  who  sold  commodities  would  have  their  incomes  doubled 
automatically,  to  meet  doubled  expenses.  Labor  would  suffer 
temporarily,  it  is  true ;  but  only  until  wages  had  been  forced  up 
to  double,  partly  by  the  departure  of  laborers  for  the  gold-mines, 
and  afterwards,  after  they  had  come  back,  by  strikes.  But,  as 
employers  would  then  be  able  to  pay  double  wages,  after  the  in- 
novation, equally  with  their  ability  to  pay  single  wages  before, 
there  would  be  little  trouble  in  reaching  this  adjustment. 

In  short,  any  facilitation  whatever  in  the  supply  of  gold,  provid- 
ing it  occurred  gradually,  could  have  no  effect  upon  basic 
economic  conditions,  except  to  increase  equally  all  scales  of 
prices.  Hence  it  could  have  no  bearing  upon  public  content  or 
discontent. 

Price-Variation  during  Past  Centuries. — This,  apparently, 
is  what  has  been  occurring  over  several  centuries  of  European 
history.  Table  65  presents  some  data  as  to  this  (reduced  to  the 
same  terms  as  Table  63 )  which  are  of  more  than  passing  interest. 
They  were  collected  by  Sir  George  Evelyn  in  1798,  as  to  prices 
dating  as  far  back  as  the  year  1050,  and  are  quoted  here  from 
Professor  Laughlin's  "The  Principles  of  Money. "  Table  65 
shows  how  even  has  been  the  rate  of  advance  in  prices  over  all 
these  centuries,  provided  no  units  of  time  smaller  than  a  half- 
century  be  considered.  During  the  seven  centuries  from  1050  to 
1750  the  rate  of  growth  has  varied  from  an  average  of  65  per 
cent  per  century  only  through  a  range  from  56  to  74  per  cent. 

During  the  period  from  1750  to  1810,  however,  this  rate  of 
growth  was  accelerated  to  186  per  cent  per  century,  while  from 
1810  to  1895  the  growth  was  reversed  into  a  shrinkage  at  the 
rate  of  73  per  cent  per  century.  About  1895  this  shrinkage  was 
again  reversed  into  a  growth,  averaging  to  1915  the  rate  of  178 
per  cent  per  century.  Apparently  our  economic  troubles  due  to 
instability  of  prices  are  comparatively  modern. 

During  these  centuries  there  occurred  all  manner  of  fluc- 
tuations in  public  content,  due  to  political  oppression,  unjust 


540 


MODERN   ECONOMIC   TENDENCIES 


taxation,  local  famine,  etc.,  etc.,  which  were  too  temporary  to 
appear  in  our  blanket-data  for  these  times.  But  they  were  not, 
so  far  as  we  know,  caused  by  this  increasing  ease  in  gold-supply. 

TABLE  65 
VARIATION  IN  ENGLISH  PRICES,  1050  TO  1800  (1900  =  100) 


Year 

Index  Number 

Rate  of  Growth: 
Per  Cent  per  Century 

1050 

9 

1550  

35 

58 

1600  

48 

74 

1650     .   . 

65 

71 

1700  

83 

56 

1750 

111 

68 

1800  

200 

160 

The  production  of  gold  is  a  technical  task,  whereas  the  prin- 
cipal commodities  of  those  centuries  depended  only  upon  agri- 
culture, breeding,  grazing,  etc.,  or  upon  the  standard  crafts — 
all  vocations  essentially  simple,  which  underwent  little  change 
during  this  long  period.  But  gold-production  is  also  facilitated 
by  expansion  of  geographical  knowledge,  and  this  sort  of 
progress,  while  prevailing  throughout  all  of  these  seven  centuries, 
was  particularly  characteristic  of  the  first  one  and  the  last  three. 

Therefore  gold  fell  continually  in  value  relatively  to  grain, 
meat  and  clothing.  In  1050  a  gold-piece  which  would  now  be 
worth  ten  dollars  would  then  have  been  worth  about  $111,  in 
terms  of  relative  labor,  and  in  purchasing-power  the  discrepancy 
would  be  far  greater. 

Many  of  the  incidents  of  medieval  history  or  tradition  in- 
volving gold-pieces,  which  sound  melodramatic  to  modern  ears, 
become  reasonable  in  the  light  of  this  fact.  In  those  days  a  king 
or  nobleman  seemed  to  be  able  to  command  almost  any  sort  of 
service  merely  by  passing  out  a  gold-piece.  And  he  always  had 
it  with  him.  Now  we  know  why. 

Then,  when  there  were  no  safe  systems  of  exchange,  a  man 
must  carry  his  investment  in  business,  or  his  pecuniary  power  a£ 
a  nobleman,  about  with  him  in  gold  coin.  Then  he  was  able  to 
do  so. 


THE   COST  OF  LIVING  541 

To-day  even  a  sturdy  soldier  is  expected  to  carry  a  maximum 
weight  which,  if  in  gold  coin,  would  be  valued  at  less  than  seven- 
teen thousand  dollars.  Indeed,  the  ordinary  man  of  to-day 
would  not  care  to  carry  in  a  belt  more  than  five  thousand  dollars 
in  gold,  if  that  much — and  we  know  from  the  suits  of  armor  that 
the  average  man  of  to-day  is  sturdier  than  the  average  knight  of 
old.  But  in  the  year  1050  these  weights  in  gold  would  have  been 
worth  $185,000  and  $55,000  respectively,  in  labor,  and  more  than 
that  in  purchasing-power — sums  commanding  respect  for  the1 
bearer,  and  well  worthy  of  a  highwayman's  risk  of  the  gallows. 

In  this,  as  in  many  other  things,  it  appears  that  our  readiness 
to  ascribe  the  prevalence  of  gibbets,  jails  and  racks  in  earlier 
days  solely  to  deficiencies  in  the  moral  standards  of  those  times 
is  not  founded  upon  fact.  These  early  judicial  crudities  are 
largely  merely  the  outward  expression  of  corresponding  and 
causative  economic  crudities,  reacting  upon  a  human  nature 
quite  like  our  own. 

For  a  man  to  be  broken  upon  the  wheel  for  mere  counter- 
feiting sounds  terribly  savage.  But  when  one  remembers  that 
there  were  then  no  banks,  in  the  modern  sense,  no  bank-checks, 
no  systems  of  exchange,  no  clearing-houses,  no  paper  securities, 
no  bills,  etc.,  coin  being  the  sole  circulating  medium,  upon  which 
all  industry  and  commerce  must  depend,  the  fact  takes  on  a 
different  aspect.  Counterfeiting  was  then  a  blow  at  the  heart  of 
society. 

Even  to-day,  in  half-wild  grazing-countries,  where  not  only  a 
man's  whole  livelihood,  but  even  his  safety  from  death  by  starva- 
tion or  thirst,  depends  upon  the  constant  companionship  of  a 
horse,  horse-stealing  becomes  most  naturally  a  capital  crime.  In 
remote  coastal  communities,  where  the  same  is  true  of  boats 
and  gear,  such  property  left  unguarded  upon  the  beach  is  held 
equally  sacred  by  public  opinion. 

Without  attempting  to  argue  that  penal  codes  were  no  more 
cruel  during  the  medieval  centuries  than  now,  it  is  still  true  that 
the  apparent  contrast  between  then  and  now  needs  to  be  toned 
down  by  several  shades,  when  the  economic  facts  come  to  be 
considered.  As  for  modern  progress,  to-day  we  have  done  away 
with  breaking  upon  the  wheel,  it  is  true ;  but  debasement  of  the 
currency  (in  purchasing-power)  is  going  on  now  faster  than  in 
the  days  of  Edward  I.  Indeed,  not  until  the  story  is  told  in 
future  decades,  can  we  be  sure  that  the  ultimate  retribution 


542  MODEKN   ECONOMIC   TENDENCIES 

therefor  may  not  be  even  more  cruel  than  breaking  upon  the 
wheel. 

The  prime  fact  is  that  it  was  not  until  about  1750  that  there 
appeared  the  first  departure  from  this  apparently  gradual, 
general  rise  in  prices,  such  as  requires  the  hypothesis  of  some 
compelling  force  other  than  the  gradual  increase  in  ease  of  gold- 
production.  It  is  these  modern  fluctuations  in  prices  which  con- 
cern the  analysis  of  economic  causes  in  hand.  For  while  the 
steady  rise  from  1050  to  1750,  at  least  in  its  broad  aspect,  may 
be  swept  out  of  the  way  by  explanation  in  terms  of  the  price  of 
gold,  yet  this  will  not  do  for  what  has  happened  during  the  last 
century. 

For  all  during  this  century  the  ease  of  gold-production  has 
been  upon  the  increase ;  yet  the  price-level  does  not  follow  as  it 
should.  While  the  temporary  rise  of  prices  between  1850  and 
1870  may  easily  be  attributed,  in  part,  to  the  discovery  of  gold 
in  California  in  1849,  the  rest  of  the  century  demands  more 
careful  study  of  other  causes. 

Professional  Economists  and  the  Gold  Theory  of  Prices. — 
In  order  to  present  first  the  case  of  the  protagonists  of  the  gold- 
explanation,  reference  may  be  made  to  two  full-page  publications 
of  the  New  York  Times,  on  Jan.  2,  1910,  and  Sept.  17,  1911, 
respectively,  giving  a  symposium  of  the  views  on  this  question 
from  representative  authorities  upon  economic  matters.  This 
source  of  information  is  also  selected  because  the  Times  is  one 
of  the  ablest  and  most  active  journals  in  the  cultivation  of  public 
opinion  in  favor  of  commercialistic  philosophies. 

In  these  two  publications  appear  parallel  diagrams  of  gold- 
accumulation  and  of  prices,  with  arguments  from  several  author- 
ities. Those  appearing  in  favor  of  the  gold-theory  are  Professors 
Taussig,  of  Harvard;  Fisher,  of  Yale;  Seligman,  of  Columbia, 
and  Dewey,  of  the  Massachusetts  Institute  of  Technology.  Those 
actively  opposing  it  are  Professors  Laughlin,  of  the  University 
of  Chicago,  and  Patten,  of  the  University  of  Pennsylvania. 
Professors  Goodnow  and  Clarke,  of  Columbia,  and  Kennedy,  of 
the  University  of  Illinois,  ascribe  rising  prices  to  the  exhaustion 
of  natural  resources  by  increase  in  population. 

But,  as  to  the  gold-hypothesis,  the  very  diagrams  published 
in  these  articles  in  the  Times  defeat  that  hypothesis,  so  far  as 
relevancy  to  modern  fluctuations  in  prices  is  concerned.  The 
ease  in  gold-production  has  progressed  fairly  steadily,  excepting 


THE   COST  OF  LIVING  543 

for  two  temporary  accelerations — one  in  1849,  due  to  the  dis- 
covery of  gold  in  California,  and  the  other  about  1888,  due  to  the 
Klondike  and  Cape  Nome  discoveries,  and  to  improvements  in 
quartz-mills  and  general  facilities  for  transportation.  It  is  true 
that  each  of  these  years  approximately  inaugurated  a  rise  in 
prices,  and  gold  is  doubtless  a  factor  therein ;  but  the  gold-theory 
offers  no  solution  for  the  following  phenomena : 

1.  The  greatest  rise  of  prices  in  modern  history,  that  between 
1750  and  1810; 

2.  The  two  great  drops  in  prices  occupying  the  bulk  of  the 
nineteenth  century,  throughout  which  period  the  ease  in  gold- 
production  was  always  increasing; 

3.  The  drop  in  prices  between  1888  and  1895  or  1898,  when 
gold  had  begun   to  cheapen  in  a  marked  manner,  yet  prices  con- 
tinued to  fall ; 

4.  The  marked  rise  in  prices  since  1898,  during  which  period 
there  has  been  no  appreciable  change  in  the  ease  of  production 
of  gold,  except  perhaps  in  the  direction  which  would  drop  prices. 

Very  plainly,  while  variations  in  the  ease  of  production  of 
gold  must  always  exert  its  effect  upon  prices,  yet  there  are  other 
and  more  powerful  factors  than  gold  at  work  in  the  control  of 
prices.  What  are  they? 

The  Tariff  and  Prices.— In  this  same  Times  articles  Mr.  J.  J. 
Rooney  is  quoted  at  length  in  support  of  the  theory  that  the  high 
cost 'of  living  is  due  to  the  tariff.  Without  denying  that  the 
effect  of  the  tariff  is  to  increase  prices — which  has  always  been 
the  prime  reason,  indeed,  for  advocating  it — and  without  digress- 
ing to  enter  that  unlimited  topic,  the  tariff  itself — yet  it  is  to  be 
pointed  out  that  it  was  during  the  period  when  the  tariff  was 
being  raised  at  its  each  modification — from  1875  to  1895,  say — 
that  prices  were  falling;  and  that  it  is  since  the  first  real  modi- 
fication of  the  tariff  downwardly,  a  few  years  ago,  that  prices 
have  risen  most  rapidly. 

Plainly,  since  we  admit  that  the  tariff  raises  prices,  the 
forces  which  exert  dominant  control  over  prices  must  be  of  an 
order  of  magnitude  altogether  larger  than  the  tariff;  for  they 
completely  overwhelm,  to  the  point  of  invisibility,  this  natural 
tendency  of  tariff-changes,  up  or  down,  to  cause  prices  to  follow. 

Density  of  Population  and  Prices.— Consider  next  the  doc- 
trine which  ascribes  high  prices  to  a  reduction  in  the  opportunity 
for  production,  due  to  increasing  population.  This  is  such  a 


544  MODERN   ECONOMIC   TENDENCIES 

favorite  explanation  of  all  manner  of  undesirable  social  phenom- 
ena that  it  is  necessary  to  answer  it  in  equally  sweeping  fashion. 

If  increase  in  population  had  actually  increased  the  difficulty 
of  extraction  of  life-support  from  the  earth — with  Malthus' 
short-sighted  old  "law  of  decreasing  returns"  as  the  sole  function 
at  work — then  life  must  have  been  easiest  on  this  continent 
when  its  population  was  least,  early  in  the  seventeenth  century, 
becoming  steadily  harder  with  the  never  varying  increase  in  pop- 
ulation, down  to  the  twentieth  century! 

But  obviously  the  facts  have  been  the  exact  opposite  of  this. 
Every  man  in  the  street  knows  that  life  here  in  the  seventeenth 
and  eighteenth  centuries  was  toilsome  in  the  extreme,  with  famine 
often  abroad  in  spite  of  the  toil,  the  surplus  land  and  the 
plenteous  game;  and  that,  speaking  generally,  life  has  become 
easier  ever  since,  almost  as  steadily  as  the  population  has  in- 
creased. There  is  not  the  slightest  room  for  doubt  that  the  ease 
and  comfort  of  life  increase  in  some  direct  relation  with,  and 
easily  as  some  higher  power  of,  the  density  of  population. 

In  normal  life  men  help,  not  hinder,  each  other.  The  duty  of 
the  professional  economist  is  to  accept  this  obvious,  common- 
sense  fact,  and  to  ascertain  with  mathematical  accuracy  the  exact 
formula  which  connects  the  increase  of  life-support  with  the 
increase  in  population,  rather  than  to  confuse  understanding  and 
delay  progress  by  mythical  assumptions  for  which  there  is  no 
foundation  in  fact. 

The  Slums  and  Prices. — In  only  one  local,  temporary  and 
abnormal  instance  may  it  be  argued  that  sheer  congestion  of 
population  (in  a  sense  contrasted  with  a  normal  growth  in  den- 
sity) begets  difficulty  in  living.  This  is  the  city-slum. 

In  so  far  as  the  institution  of  commercialism  concentrates 
people  artificially  in  cities,  by  denying  to  farming  its  natural 
pecuniary  reward,  this  forced  and  unwholesome  distortion  of  the 
natural  distribution  of  life  between  city  and  country  does  inter- 
fere, temporarily  and  partially,  with  the  natural  tendency  of 
productivity  per  individual  to  increase  with  population.  Yet 
even  here,  it  must  be  noted,  population  flocks  from  the  farms  to 
the  slums,  as  we  have  seen,  primarily  because  it  is  easier  to  make 
a  living  in  the  slums  than  on  the  farms. 

But,  in  America  at  least,  even  this  detrimental  phenomenon 
of  the  slums  has  been  restricted  to  a  minor  function  in  the  con- 
trol of  national  productivity.  It  has  not  been  competent  to 


THE   COST   OF  LIVING  545 

annul  the  natural  tendency  of  individual  productivity,  and  hence 
ease  of  living,  to  increase  with  population.  This  is  proven  by 
Tables  14  to  18,  showing  that  the  supply  of  all  staple  commodi- 
ties PER  CAPITA  has  actually  increased  steadily  with  the  popula- 
tion. In  the  later  decades,  indeed,  it  has  increased  very  rapidly 
therewith. 

Our  social  discontent  does  not  arise  from  insufficiency  of  pro- 
duction (although  that,  viewed  relatively  to  our  latent  possi- 
bilities, is  a  factor)  but  to  disparity  and  uncertainty  of  income. 
For  that  is  increasing  with  the  population,  while  aggregate  and 
per-capita  supplies  are  increasing. 

Supply  and  Demand  as  Determinants  of  Price.— In  the 
face  of  these  simple  statistics  every  suggestion  that  high  prices 
are  due  to  density  of  population,  or  even  that  there  is  any  direct 
connection  whatever  between  supply  and  prices,  in  the  national 
sense,  becomes  absurd.  If  there  were  any  such  a  connection  then 
either  these  tables  must  show  the  supplies  per  capita  as  irregularly 
decreasing,  in  order  to  explain  the  rising  prices;  or  else  they 
must  show  the  prices  as  steadily  decreasing,  in  order  to  reveal 
the  increasing  supplies  as  working  their  normal  result.  But 
neither  of  these  things  appears  in  the  statistics. 

A  single  possible  exception  to  these  statements  as  to  the  in- 
creasing supply  is  to  be  found  in  the  case  of  meat.  Meat  is  a 
commodity  producible  only  by  a  relatively  wasteful  use  of  land, 
and  for  that  reason  it  probably  must  be  dropped  gradually  from 
our  diet  as  the  density  of  population  increases.  But  what  is 
said  elsewhere  as  to  prices  in  general  applies  also  to  the  price  of 
meat,  in  that  the  latter  is  now  determined  more  by  commercial 
than  by  natural  causes. 

The  man-in-the-street  feels  that  he  knows  that  prices  are  the 
result  of  a  balance  struck  between  supply  and  demand.  Yet  the 
facts  so  far  adduced  negative  this  idea  broadly.  Speaking  gen- 
erally, the  careful  economist  can  find  almost  no  connection 
between  supply  or  demand,  on  the  one  hand,  and  prices  on  the 
other,  except  in  a  local,  temporary  and  secondary  sense. 

Vacant-lot  Gardening. — Take  for  example  the  recent  nation- 
wide drive  to  increase  our  food-supply  by  vacant-lot  gardening, 
and  so  to  reduce  the  price.  What  is  the  result?  A  certain 
quantity  of  vegetables  has  been  produced.  Therefore  just  that 
much  less  truck  has  been  bought  from  the  professional  gardener. 
Therefore  just  that  much  less  of  his  stuff  has  been  sold,  the 


546  MODERN   ECONOMIC  TENDENCIES 

surplus  rots  on  the  ground,  and  so  next  year  he  plants  just  that 
much  less. 

The  amount  of  anything  which  can  be  produced  is  only  the 
amount  which  can  be  sold.  The  vacant-lot  gardens  had  no 
slightest  effect  upon  the  amount  which  could  be  sold,  except  to 
decrease  it.  They  added  not  one  penny  to  the  purchasing-power 
of  the  nation  for  vegetables.  Hence  they  left  the  total  amount  of 
garden-truck  unaffected,  merely  transferring  a  part  of  it  from 
the  farm  to  the  vacant  lot. 

It  is  true  that  the  purchasing-power  of  the  government  was 
markedly  increased,  at  just  about  this  time,  by  the  issue  of 
enormous  volumes  of  war-credits,  and  these  credits  purchased 
enormous  quantities  of  food-stuffs  and  so  stimulated  production 
— a  process  to  which,  we  shall  give  full  attention  further  on. 
But,  in  the  first  place,  the  vacant-lot  gardens  had  nothing  to 
do  with  the  appearance  of  these  war-credits.  In  the  second 
place,  this  method  of  stimulating  production,  far  from  reducing 
prices,  sent  them  soaring! 

Under  peace-conditions,  with  an  unvarying  or  slowly  varying 
volume  of  governmental  credit  extant,  the  result  of  amateur 
gardening,  or  any  other  artificially  stimulated  production,  can- 
not be,  in  the  long  run,  to  release  a  single  additional  pound  of 
food  for  consumption.  The  amount  of  food  remains  substantially 
constant,  except  as  the  purchasing-power  of  the  people  is  slowly 
reduced  by  the  growth  of  commercialism,  and  as  the  productive 
capacity  of  the  farmer  is  slowly  increased  by  progress  in  scientific 
agriculture.  At  the  same  time,  the  allurements  of  commercial 
incomes  are  steadily  reducing  the  agricultural  population,  by 
migration  to  the  cities. 

The  combined  result  of  these  three  slowly  changing  factors, 
when  viewed  over  several  decades,  has  been  a  slowly  increasing 
production  of  food  per  capita,  and  a  slowly  decreasing  production 
relatively  to  our  rising  latent  (but  not  evolved)  productivity,  or 
theoretic  ability  to  produce.  But  a  simultaneous  result  of  these 
same  three  processes,  in  combination,  has  been  a  steady,  rapid 
and  accelerating  rise  in  its  price. 

The  farmers  are  always  raising  more  than  they  can  sell  profit- 
ably. Since  their  land  is  capable  always  of  doing  far  more  than 
this,  it  were  folly  to  do  less.  As  in  every  other  walk  of  economic 
life,  the  supply  is  always  greater  than  the  people's  purchasing- 
power.  The  amount  which  our  farmers  can  raise  is  determined 


THE  COST  OF  LIVING  547 

neither  by  territorial  limitations,  nor  by  the  amount  of  land 
improved  (which  is  itself  determined  by  the  produce  which  can 
be  sold  when  raised),  nor  by  technical  aids  to  agriculture,  nor  by 
the  amount  of  labor  available  in  the  country  as  a  whole.  It  is 
determined  solely  by  the  purchasing-power  of  the  cities. 

The  amount  raised  to-day  is  certainly  not  one-half,  and 
easily  not  one-tenth,  of  that  made  possible  by  modern  technology 
on  the  acreage  already  improved,  with  the  labor  already  avail- 
able, were  only  the  economic  bars  to  selling  it  once  removed. 
Further,  if  it  were  not  for  these  same  artificial  economic  bars  to 
interchange,  and  hence  production,  a  vast  acreage  now  lying  idle 
and  unimproved  near  our  large  cities  would  immediately  be  put 
to  use. 

It  is  for  all  these  reasons  that  there  is  no  visible  connection 
between  "bumper  crops"  and  popular  prosperity  or  contented- 
ness.  Hard  times  in  the  cities  may  reduce  the  acreage  planted 
in  the  country,  for  it  is  in  the  city  that  is  determined  what  shall 
happen  in  the  country ;  but  botanical  exuberance  in  the  country 
finds  no  necessary  reflection  in  prosperity  in  town.  Cause  and 
effect  act  here  in  the  opposite  direction.  Indeed,  the  prime 
economic  result  of  bumper  crops  is  often  to  make  the  farmer 
poor,  by  dropping  prices  for  farm-produce. 

The  farmer,  in  his  poor,  weak  way,  knows  the  importance  of 
"charging  all  the  traffic  will  bear,"  by  restricting  production  far 
below  normal  in  order  that  pecuniary  gains  may  be  a  maximum, 
only  less  clearly  than  does  the  businessman.  While  it  may  not 
be  a  conscious  and  dominant  policy  with  him,  as  it  is  with  the 
city-businessman,  yet  he  is  forced  into  it  no  less  inexorably — 
by  the  increasing  starvation  of  those  who  insist  upon  remaining 
upon  the  farm,  to  raise  surplus  produce  which  must  rot  on  the 
ground. 

Commercial  Distortion  of  Natural  Supply  and  Demand. — 
The  explanation  of  all  this  lies  in  the  artificial  distortion  which 
is  given  to  both  supply  and  demand  by  commercialism.  In  the 
commercial  world  it  is  never  the  supply  of  the  real  producer 
which  is  balanced  against  the  Consumer's  demand ;  it  is  that  of 
the  retail  commercialist  instead.  In  no  case  is  the  demand 
which  reaches  the  producer  that  put  forth  by  the  Ultimate  Con- 
sumer; it  is  that  of  the  commercialist-employer,  instead;  and 
he  passes  on  to  the  producer  a  mere  fraction  of  the  price  paid  by 
the  Consumer. 


548  MODERN   ECONOMIC   TENDENCIES 

Thus  there  may  be  no  demand  whatever  in  the  commercial 
world  for  chilled  car-wheels  at  a  time  when  millions  of  congested 
city-people  are  suffering  tragically  for  more  cars,  and  would 
gladly  pay  for  them — if  only  their  money  could  be  gotten 
through  to  those  who  make  cars.  Or  there  may  be  in  com- 
mercialdom  a  most  active  demand  for  drummers  for  inciting 
trade,  say,  when  no  Consumer  in  the  land  expresses  the  slightest 
need  for  a  drummer,  to  incite  him  to  spend  all  he  can  afford  to 
spend. 

Then  the  purchasing-power  of  the  commercial  world  experi- 
ences violent,  unnatural  fluctuations  through  the  sudden  release 
of  demand  through  an  expansion  in  the  valuation  of  securities; 
or  a  retraction  of  demand  through  a  temporary  collapse  in  the 
stock-market.  This  is  a  fluctuation  in  commercial  demand, 
with  its  effect  upon  prices,  due  to  fluctuations  in  the  current 
volume  of  commercial  credit — a  most  important  factor  in  prices 
to  which  the  discussion  will  recur  later. 

But  all  of  these  artificial  phenomena  are  in  direct  contrast 
with  the  natural  state  of  affairs.  For  both  supply  and  demand, 
in  their  true  human  sense,  are  quite  steady.  They  vary  only 
with  the  gradual  drift  of  population  in  many  lands  together,  or 
with  the  slow  education  of  myriads  of  people.  It  is  impossible 
to-day  to  convey  to  the  mind,  so  long  have  we  steeped  in  the 
tradition  of  spasmodic  and  violent  fluctuations  of  both  supply 
and  demand  as  being  natural  and  inevitable,  any  adequate  con- 
ception of  how  massively  slow  and  steady  they  both  are  in  their 
natural  movements.  It  is  only  the  toxic  influence  of  com- 
mercialism which  makes  them  stagger,  leap,  shout,  sing — and 
occasionally  commit  murder. 

Fashion,  now  and  then,  may  flit  capriciously  from  commodity 
to  commodity,  it  is  true ;  but  this  can  have  no  influence  over  the 
general  level  of  prices.  All  it  can  do  is  to  raise  one  price  as  it 
drops  another.  Neither  the  natural  specific  productivity  nor 
the  natural  rate  of  consumption,  in  aggregate  for  any  com- 
munity, varies  with  fashion  or  whim.  Hence  personal  exhorta- 
tion to  control  them  by  direct  effort  is  silly. 

All  our  alternating  periods  of  hard  times  and  prosperity,  of 
low  or  high  prices,  of  active  or  dull  trade,  are  the  result  of 
purely  artificial  and  commercial,  and  not  at  all  of  natural  or 
human  factors — of  reaction  of  invention  upon  invention,  and 
not  of  anything  psychic.  It  is  the  instability  of  our  economic 


THE   COST  OF  LIVING  549 

structure,  due  to  our  lack  of  organizational  underpinning  for 
our  economic  effort,  and  not  the  flippant  nature  of  the  human 
individual,  which  forces  prices  and  volumes  of  trade  and  em- 
ployment to  wabble  and  flop  back  and  forth  convulsively. 

The  Function  of  Psychic  Forces. — When  one  turns  from  the 
physical  or  organizational  to  the  psychological  aspect  of  the 
problem  of  prices  one  discovers  a  partial,  secondary  effectiveness 
in  one  of  the  causes  adduced  by  the  professors  quoted,  namely, 
disparity  of  wealth.  Professor  Taussig  follows  the  late  James 
J.  Hill  in  laying  stress  upon  the  "cost  of  high  living"  as  an 
explanation  of  the  high  cost  of  low  living,  although  he  also  leans 
heavily  upon  the  gold-theory. 

It  is  unquestionable  that  discontent  depends  far  more  upon 
relative  than  upon  absolute  want.  It  is  the  growing  disparity 
of  wealth,  rather  than  real  poverty,  which  explains  the  turbulence 
amongst  the  wage-earners.  If  the  poorer  classes  observe  wanton 
display  upon  the  part  of  the  rich  they  are  the  last  to  be  blamed 
if  they  make  every  effort  to  copy,  or  if  they  become  bitter  when 
they  fail.  It  is  the  tempter  who  sins,  rather  than  the  tempted. 

Psychic  Forces  are  not  Causative,  but  Secondary.— But 
these  conditions  are  psychological,  not  physical  nor  economic. 
They  may  explain  standards  of  desire,  but  they  have  no  bearing 
upon  purchasing-power  or  prices.  No  person  can  bring  hardship 
upon  himself  by  buying  so  much  as  to  send  prices  up  cruelly — 
so  that  his  voluntary  reversal  of  this  policy,  under  the  kindly 
guidance  of  the  Taussig-Hill  school,  might  ease  matters  for 
him.  The  poor  suffer  hardship  from  high  prices,  but  those 
prices  are  not  high  because  of  the  lavish  quantities  which  the 
poor  buy. 

The  rich,  on  the  other  hand,  might  easily  be  suspected  of 
buying  so  much  as  to  send  prices  up,  but  never  to  the  extent  of 
personal  hardship  to  the  buyer.  Therefore  Professor  Taussig 
must  appeal  to  the  rich  to  abstain  in  the  interests  of  the  poor 
—a  line  of  attack  which  has  not  hitherto  brought  results  which 
might  be  called  encouraging. 

But  even  if  the  rich  should  respond,  and  should  abstain,  what 
good  would  it  do  ?  Their  refusal  to  spend  their  money  would  in 
no  wise  relieve  the  poor.  Any  reduction  in  the  purchases  by 
the  rich  would  certainly  reduce  the  volume  of  goods  made,  and 
hence  the  employment  for  the  poor,  but  it  would  have  no  slight- 


550  MODERN   ECONOMIC   TENDENCIES 

est  tendency  to  drop  prices.  We  have  seen  that  there  is  no  visible 
connection  between  supply  or  demand  and  price. 

While  these  childish  appeals  to  the  superficial  impulses  of  the 
ignorant,  to  make  direct  attack  upon  the  economic  problem  in 
one  futile  way  or  another,  may  be  excusable  in  an  ignorant 
labor-leader,  it  does  seem  as  if  the  dignity  of  the  professional 
sociologist,  if  not  his  intelligence,  should  protect  us  from  pueril- 
ities of  this  sort. 

Summary  of  General  Factors  in  Price-Determination. — 
To  summarize,  prices  are  the  result  of  a  reaction  between  natural 
physical  and  artificial  commercial  forces  through  the  medium  of 
at  least  four  determining  factors,  namely,  (1)  The  productive 
capacity  of  the  population,  or  supply.  This,  properly  speaking, 
should  be,  when  balanced  against  demand,  the  only  factor  deter- 
mining price.  Normally  and  naturally  it  is  all  but  constant, 
growing  only  very  slowly  and  steadily.  It  is  naturally  dependent 
only  upon  the  territorial  and  technical  advantages  enjoyed  by  a 
nation,  both  of  which  alter  only  slowly  and  steadily. 

Yet  at  present  this  purely  physical  and  only  natural  aspect  of 
supply  is  an  indiscernible  factor  in  prices.  The  only  way  in 
which  it  enters  at  all,  indeed,  is  through  the  medium  of  the 
question  of  the  number  of  people  which  commercialism  permits 
to  remain  active  in  production,  as  contrasted  with  those  enticed 
away  by  the  more  lucrative  occupations  of  commercial  militarism 
• — or  compelled  to  remain  idle,  as  debated  in  the  later  chapter 
upon  Unemployment.  But  this  latter  is  an  artificial  factor. 

(2)  The  ease  of  production  of  gold.     This  factor  amounts 
merely  to  a  measuring-unit,  or  scale.    It  affects  all  prices  alike, 
whether  those  of  commodities  or  the  wages  of  labor,  although  not 
with  equal  promptness.    It  is  a  variant  function  only  in  terms 
of  time,  and  not  of  one  commodity  against  another. 

This  factor  also  alters  fairly  steadily,  except  for  such  infre- 
quent discoveries  of  gold  as  that  of  California  in  1849,  or  that 
of  Alaska  some  forty  years  later — occurrences  which  are  not 
likely  to  repeat  themselves  in  the  future. 

(3)  The  intensity  of  active  commercialism  current  in  pro- 
portion to  production,  and  also  the  current  burden  of  interest- 
payments.    These  add  to  the  natural  cost  of  every  commodity 
(as  measured  in  gold)  the  cost  of  commercial  combat,  to  deter- 
mine the  final  valuation  of  the  commodity  to  be  collected  from 
the  Ultimate  Consumer.     Commercialism  acts  in  this  way  in 


THE  COST  OF  LIVING  551 

addition  to  its  function  in  limiting  the  personnel  of  production. 

This  factor  is  also  capable  of  alteration  only  slowly,  in  com- 
parison with  the  next  factor — credit — although  rapidly  in  com- 
parison with  the  first  and  second  factors. 

(4)  The  momentary  volume  of  credit  available  for  sustaining 
purchases.  While  this,  in  part,  is  an  intangible,  psychological 
affair,  and  therefore  subject  to  frequent  and  irresponsible  fluc- 
tuation, yet  more  than  that,  it  is  a  tangible,  deliberately  organ- 
ized, economic  institution.  In  this  latter  aspect  it  depends  upon 
the  ebb  and  flow  of  valuations  in  Wall  street — itself  not  alto- 
gether a  planless  phenomenon.  This  momentary  aggregate 
volume  of  security-valuations  determines  monetary,  commercial 
demand — as  contrasted  with  human  need. 

For  this  last  factor  in  prices  is  not  merely  subject  to  fluctua- 
tion through  the  deliberate  efforts  of  manipulators  to  vary  it, 
but  also  through  its  own  inherent  super-sensitiveness  and  in- 
stability. These  features  are  so  extreme,  indeed,  that  no  degree 
of  effort  upon  the  part  of  the  financial  people — even  if  we  could 
imagine  them  as  exerting  it — could  keep  valuations  quiet.  In 
reality,  the  vagaries  of  this  oversensitive  medium,  upon  which 
we  have  chosen  to  build  our  economic  shelters,  become,  under 
the  deliberate  teasing  of  professional  manipulators,  such  as  all 
but  defy  record.  Not  even  the  tickers  can  keep  track  of  it. 

Times  of  extensive  credit  are  periods  of  active  buying  and 
elevation  of  prices.  The  public  then  can  buy  that  for  which  it 
can  pay  out  of  current  earnings,  plus  that  paid  for  in  credit ;  and 
it  has  been  seen  how,  in  times  of  commercial  expansion,  the 
largest  industrial  enterprises  purchase  by  the  latter  means  upon 
an  enormous  scale.  Indeed,  according  to  the  public  testimony  of 
the  most  prominent  railway  and  bank  officials,  commercialism 
has  brought  these  enterprises  to  rely  upon  this  function  for  their 
very  life-support. 

This,  indeed,  is  the  peril  which  we  are  building  for  ourselves. 
A  sudden  collapse  of  commercial  credit,  at  a  critical  period  of 
economic  tension,  will  plunge  every  factory  and  railroad  in  the 
land  into  a  stroke  of  apoplexy.  The  unemployed  will  pour  upon 
the  streets  by  the  million,  and  revolution  will  be  instantly 
irrevocable. 

Statistical  Corroboration. — Statistics  should  reveal  this  re- 
lation between  volume  of  credit-instruments,  on  the  one  hand, 
and  the  rise  of  prices,  as  a  result  of  exaggerated  demand,  on  the 


552  MODERN   ECONOMIC  TENDENCIES 

other.  The  lower  lines  of  Table  11,  Chapter  V,  should  show  a 
parallel  variation  between  credit  and  price  indexes. 

Roughly,  they  do  so,  in  that  both  are  highest  in  the  earlier 
and  the  later  decades,  while  sagging  in  the  middle.  But  the 
parallelism  is  too  approximate  for  complete  satisfaction.  Thus, 
the  credit-figure  reaches  its  minimum  in  1875,  and  is  then  only 
slightly  below  that  of  1865,  whereas  the  price-figure  does  not 
reach  its  minimum  until  1895  and  is  then  nearly  40  per  cent 
below  that  for  1865.  The  credit-figure  for  1915  is  over  twice 
that  for  1865,  whereas  the  price-figure  for  1915  is  14  per  cent 
less  than  that  for  1865. 

The  explanation  of  these  apparent  discrepancies  lies  in  the  fact 
that  commercial  credit  is  not  the  only  controller  of  prices,  nor  is 
our  own  land  an  isolated  economic  field.  Prices  in  America  and 
Europe  vary  fairly  closely  together,  as  the  result  of  forces  arising 
in  both  continents,  however  those  in  America  may  be  uniformly 
higher  than  in  Europe.  At  this  juncture,  therefore,  economic 
influences  must  be  traced  briefly  across  the  Atlantic. 

Of  the  four  factors  listed  above,  the  first  three  have  already 
been  sufficiently  debated.  The  natural  influence  of  productivity 
upon  prices  has  been  found  to  be  overruled  into  impotence,  and 
lost  to  sight.  That  of  the  increasing  ease  of  gold-supply 
equalizes  itself,  given  a  little  time,  upon  all  sides  of  the  situation. 
That  of  commercialism  is  huge  and  dominating,  but  it  has 
already  been  explored  in  its  structural  detail.  That  of  credit 
alone,  as  one  feature  of  commercialism  the  workings  of  which 
have  not  yet  been  fully  explained,  remains  to  be  considered. 

But  the  disturbing  effect  of  fluctuations  in  commercial  credit 
upon  prices  cannot  be  debated  properly  without  a  careful  dis- 
cussion, first,  of  the  function  of  war  in  fluctuating  credits. 
Indeed,  the  natural  intimacy  existing  between  war  and  com- 
mercialism is  one  of  our  most  important  secondary  topics. 

The  Influence  of  War  upon  Prices. — Doubtless  one  of  the 
prime  factors  in  the  elevation  of  prices  is  war.  This  is  obvious 
to  the  most  cursory  student  of  history.  As  Mulhall  states  it  in 
his  "History  of  Prices": 

"The  wars  of  Bonaparte  drove  up  prices  of  agricultural 
products  72  per  cent,  and  those  of  manufactured  goods  38  per 
cent.  .  .  .  Again,  there  was  a  rise  consequent  upon  the  wars 
of  1851-60  (namely,  the  Crimean  and  Solferino  campaigns, 


THE  COST  OF  LIVING  553 

and  the  Indian  mutiny)  when  agricultural  prices  rose  16  per 
cent  and  the  general  price-level  of  the  world  showed  an  ad- 
vance of  5  per  cent.  In  the  third  place,  the  American  war 
of  1861-65  had  such  an  effect  that  prices  rose  78  per  cent  in 
the  United  States  and  52  per  cent  in  Great  Britain,  over  the 
level  of  1841-50 ;  and  taking  the  whole  decade  of  1861-70  we 
find  that  its  level  for  the  whole  world  was  21  per  cent  higher 
in  agricultural  products,  and  11  per  cent  higher  for  the  general 
level  of  all  merchandise,  than  the  de*cade  ending  in  1850.  It 
is  impossible,  therefore,  to  doubt  Tooke's  theory  that  Svar  has 
a  tendency  to  raise  prices,  by  obstructing  or  diminishing  the 
supply  of  commodities.' 

"The  peace  that  succeeded  Waterloo  saw  prices  fall  nearly 
50  per  cent,  the  world's  level  for  the  decade  ending  1830 
being  33  per  cent  less  than  the  average  for  1811-20.  In  like 
manner  there  was  a  steady  decline  after  the  war  in  the  United 
States,  the  decade  of  1871-80  for  the  world  being  5  per  cent 
under  the  preceding,  and  we  have  had  a  continuous  fall  of 
prices  since  the  Franco-German  war.  In  a  word,  peace  re- 
stores the  level  of  the  natural  tendency  of  prices  that  was 
disturbed  by  war." 

But,  while  admitting  the  causative  effect  of  war  upon  prices, 
we  do  deny  here  Tooke's  theory  that  it  is  chiefly  by  "obstructing 
or  diminishing  the  supply  of  commodities"  that  war  accom- 
plishes it.  While  this  process  is  contributory,  it  proves  to  be 
quite  secondary.  There  is  another,  larger  force  at  work  in  the 
elevation  of  prices  by  war. 

For  the  data  appearing  in  Table  62  do  not  all  agree  with 
Mulhall's  figures.  According  to  Jevons  and  Sauerbeck  the 
American  Civil  War,  to  which  Mulhall  ascribes  such  violent  dis- 
turbance, caused  scarcely  a  ripple  in  the  current  price-level. 
Again,  the  period  from  1900  to  1914,  which  has  been  one  of 
unbroken  peace  in  the  United  States,  has  witnessed  the  most 
rapid  rise  in  prices  ever  recorded — distinctly  higher  than  during 
the  prolonged  Napoleonic  wars,  involving  virtually  the  entire 
continent  of  Europe.  Plainly  the  war-explanation,  while  partly 
correct,  is  not  complete  in  itself. 

Moreover,  in  Napoleonic  days  Europe  was  virtually  the  entire 
economic  world.  While  it  is  true  that  America  and  the  East 
Indies  were  exporting  to  Europe  what  commodities  might  be 
carried  in  a  few  hundred  vessels,  few  of  which  exceeded  five  hun- 


554  MODERN   ECONOMIC   TENDENCIES 

died  tons  burden  and  all  of  which  consumed  months  in  a  voyage, 
from  the  rest  of  the  world  Europe  drew  almost  nothing  of  staple 
importance.  Therefore  in  Napoleon's  day  it  was  the  entire 
economic  world  which  was  at  war. 

But  since  1895,  although  there  has  always  been  war  somewhere 
on  the  earth's  surface,  yet  it  has  never  involved  more  than  a 
fraction — and,  except  for  the  war  of  1914,  a  very  small  fraction 
— of  the  commercially  unified  world,  at  any  one  time.  Yet 
prices  have  risen  since  1895  as  never  before,  either  during  the 
stormy  average  of  the  Victorian  era  or  during  the  tornadic 
violence  of  the  Napoleonic  period.  We  must  look  further  than 
war  for  a  full  explanation  of  the  rise  of  prices. 

It  is  undoubtedly  true  that  war  shuts  off  some  of  the  sources 
of  supply  normal  to  peace,  which  is  MulhalPs  explanation  of  the 
situation.  But  prices  do  not  depend  upon  supply. 

It  is  undoubtedly  true,  also,  that  war  accentuates  the  destruc- 
tive consumption  of  commodities.  But  a  brief  study  of  the 
problem  shows  that  this  is  not  sufficient  to  account  for  the  degree 
of  accentuation  of  prices  in  wartime.  There  is  another  and  a 
larger  force  at  work,  for  the  time. 

War  not  only  throttles  supply  and  exaggerates  consumption. 
It  releases  temporarily  an  enormous  potential  fund  of  purchas- 
ing-power. War  always  expands  credits  marvelously. 

It  is  not  merely  that  war  accentuates  demand  in  the  physical 
sense.  It  is  that  it  expands  the  ability  of  the  people  to  give 
economic  expression  to  that  demand,  in  the  form  of  suddenly 
inflated  purchasing-power.  This  is  due  to  a  forced  expansion  of 
public  credit,  which  appears  in  the  market  as  so  much  money; 
and  this  credit  rests  upon  the  outburst  'of  patriotism  which  is 
natural  at  such  a  time,  but  which  cannot  be  had  in  times  of 
peace.4 

The  Identity  of  War  and  Commercialism. — So  much  is 
fairly  obvious.  But  what  is  not  obvious  is  that  it  is  this  same 
sort  of  economic  reaction,  this  same  sudden  and  arbitrary  ex- 
pansion (or  collapse)  of  credit,  which  explains  these  convulsive 
variations  in  prices  and  purchasing-power  in  the  commercial 
world,  in  time  of  peace,  which  are  so  at  variance  with  the  slow, 

*  The  amount  of  such  sudden  expansion  of  purchasing-power  due  to 
patriotism,  in  the  case  of  the  Great  War,  is  approximately  two  hun- 
dred billions  of  dollars,  for  the  four  Allies;  but  most  of  this  was 
expended  in  America. 


THE   COST   OF  LIVING  555 

steady  and  all  but  imperceptible  movements  naturally  to  be  ex- 
pected then. 

There  has  been  repeated  occasion  in  these  pages  to  refer  to 
commercialism  as  merely  one  species  of  militarism.  The  iden- 
tity of  the  two  rests  primarily  upon  the  combative  nature  of 
commercialism.  But  a  further  link  of  identity  is  now  revealed 
in  this  matter  of  credit.  The  history  of  neither  militarism  nor 
commercialism  can  be  written  without  a  study  of  the  history  of 
credit.  The  evolution  of  credit  cannot  be  understood  without 
that  of  both  militarism  and  commercialism. 

Martial  and  commercial  credits  are  alike  in  their  despotic  sway 
over  the  stable  and  wholesome  biological  tendencies  of  life.  In 
order  to  conduct  war,  whether  martial  or  commercial,  both  men 
and  credit  are  required.  From  the  earliest  periods  of  history  the 
troubles  of  kings  in  procuring  the  credit  with  which  to  prosecute 
their  wars  has  been  a  familiar  incident.  Frequently  it  has  con- 
trolled the  destinies  of  nations.  To-day  it  is  the  commercialists 
and  their  credits  which  dominate  the  world-stage. 

With  the  progress  of  the  arts  through  the  centuries  this 
feature  of  warfare  has  increasingly  become  the  central  issue. 
Modern  wars  are  won  or  lost  more  in  the  field  of  finance  than  in 
that  of  battle.  It  is  the  size  of  the  loans  floated  successfully 
during  the  war,  and  the  degree  of  faith  in  them  latent  within  the 
mass  of  the  people,  which  determines  victory  or  defeat. 

It  is  this  also,  in  both  martial  and  commercial  warfare,  which 
determines  the  elevation  of  prices.  In  each  case  it  is  both  the 
withdrawal  of  men  from  production  and  the  unusual  release 
of  purchasing-power,  through  expanded  credit,  which  elevate 
prices.  In  each  case  it  is  partisan  faith  in  the  ability  of  some 
given  fighting-unit  which  supplies  the  psychological  element  in 
the  credit.  In  each  case  it  is  upon  this  faith,  as  a  foundation, 
that  the  tangible  instruments  of  credit  are  built,  expanded  and 
"floated." 

In  the  first  case  this  basic  sentiment  is  called  patriotism.  In 
the  second  it  is  called  commercial  confidence. 

The  Source  of  Credit-Expansion. — When  a  people  thus 
mobilizes  its  latent  faith  in  itself,  by  the  issue  of  credits  for  the 
purchase  of  supplies  to  be  consumed  in  war,  it  is  releasing  sud- 
denly and  explosively  an  accumulation  of  economic  energy  which 
is  quite  in  parallel  with  the  release  of  physical  energy  in  the 
explosion  of  gunpowder.  There  is,  however,  an  apparent  con- 


556  MODERN   ECONOMIC   TENDENCIES 

trast  between  the  two  in  the  fact  that,  in  the  case  of  the  gun- 
powder, the  energy  to  be  released  must  be  accumulated  before- 
hand, whereas  that  released  in  the  form  of  credit  is  commonly 
supposed  to  be  made  good,  in  physical  equivalent,  at  some  later 
time. 

Yet  in  this  respect  the  popular  conception  of  credit,  as  an 
advance-draft  upon  the  community's  future  productive  power, 
is  wholly  wrong.  Nature  no  more  consents  to  be  man's  creditor 
in  economic  energetics  than  in  physical  or  chemical.  In  any 
phenomenon  whatever,  only  that  energy  can  be  released  which  is 
already  on  hand. 

Thus  the  economic  energy  which  is  always  released  suddenly, 
and  to  an  astounding  degree,  upon  each  declaration  of  war,  is 
merely  that  which  has  been  currently  accumulated,  but  pent  up 
by  social  timidity  or  selfishness,  during  the  preceding  period  of 
peace.  This  energy  might  have  been  available  for  community- 
welfare  at  any  time,  had  only  a  suitable  social  state  of  mind  been 
present  to  release  it. 

And,  it  may  be  noted  in  passing,  it  is  social  states  of  mind  in 
time  of  peace,  and  the  forefending  of  war  by  reason — and  not 
the  waging  of  war  by  force — which  is  the  official  business  of  the 
universities. 

When  war  is  declared  this  pent-up  energy  is  released  by  a 
common  agreement  in  state  of  mind  such  as  unfortunately  can- 
not be — or  has  not  been — attained,  it  seems,  in  time  of  and  for 
the  aims  of  peace.  It  is  released  by  a  simultaneous,  all  but  uni- 
versal abandonment  of  those  selfish  aims  which  peculiarly 
characterize  times  of  peace,  and  a  devotion  to  the  common  good 
for  the  preservation  of  the  state.  But  such  a  sentiment  is  just 
as  important  for  the  welfare  and  self-respect  of  the  state  in  time 
of  peace  as  in  time  of  war — a  sentiment,  indeed,  which,  if  only 
manifested  in  time  of  peace,  would  forfend  war. 

At  present  the  primary  factor  of  restraint  which  pens  up  all 
this  valuable  latent  social  energy  is  the  paralyzing  national 
belief,  embodied  in  all  the  laws,  organizations  and  traditions  of 
commercialism,  that  mankind  will  react  productively  only  to  the 
selfish  inducements  of  pecuniary  gain  in  its  most  shortsighted 
sense.  Therefore  this  belief  should  be  fought  by  every  patriotic 
person  just  as  religiously  as  one  now  fights  German  intrigue. 

For  it  is  this  belief  which  now  enforces  upon  us  the  universal 
commercial  policy  of  "charging  all  the  traffic  will  bear";  and 


THE    COST   OF  LIVING  557 

this  is  a  process  which,  whatever  may  be  the  motives  behind  it, 
inevitably  restricts  our  currently  available  volume  of  credit  and 
purchasing-power,  at  every  point  of  transfer  in  the  economic 
structure,  to  some  70  or  80  per  cent  below  the  biological  normal. 

The  phenomenal  outburst  of  energy  which  characterizes  every 
declaration  of  war  is  no  loan  nor  draft  upon  the  future.  It  is 
merely  a  portion  of  this  70  or  80  per  cent  of  the  naturally  avail- 
able energy  which  commercialism  denies  to  us  in  time  of  peace, 
through  our  refusal  to  believe  in  our  fellow-workers  as  we  do  in 
our  fellow-fighters,  and  which  becomes  available  just  as  soon  as 
we  adopt  that  faith. 

In  spite  of  the  physical  destructiveness  of  war,  just  see  what 
that  faith  accomplishes !  War  releases  such  a  tremendous  fund 
of  pent-up  faith-credit,  and  with  it  mobilizes  such  a  tremendous 
outburst  of  social  energy,  that  the  physical  destructiveness  of 
every  war,  however  huge  absolutely,  is  relatively  submerged  and 
soon  lost  to  sight  in  a  flood  of  reconstructive  vigor. 

The  Ebb  and  Flow  of  War. — If  one  glances  at  the  various 
martial  outbursts  of  the  last  sixty-five  years,  on  the  part  of  those 
nations  which  together  constitute  that  commercially  unified,  if 
politically  divided,  world-community  which  spreads  across  North 
America,  Europe  and  portions  of  the  other  continents,  they 
will  appear  as  listed  in  Table  66.  As  revealed  by  this  table,  the 
year  1850,  whence  most  of  our  statistical  data  take  their  origin, 
was  the  beginning  of  a  martially  stormy  period  covering  two 
decades. 

From  the  fall  of  Napoleon,  in  1815,  until  1848,  the  peace  of 
Europe  had  been  broken  only  by  minor,  local,  internal  revolu- 
tions, none  of  which  had  any  lasting  effect.  Metternich's  policy 
of  stern  repression  had  worked  excellently,  as  all  absolutism 
does,  so  long  as  it  worked  at  all. 

But  in  1848  broke  forth  that  general  revolution  which  spread 
finally  all  over  western  Europe.  It  lasted  only  a  year  or  two,  it 
is  true,  and  was  finally  put  down  by  purely  repressive  measures 
which  left  all  the  sources  of  discontent  in  full  action — held  down 
merely  by  a  heavier  weight  of  militarism  upon  the  political 
safety-valve  than  ever  before.  The  military  budget  of  almost 
every  country  was  enlarged  thereby. 

But  this  was  only  the  beginning  of  turbulence.  Within  three 
years  thereafter  three  of  the  great  European  powers  were  actively 
involved  in  war,  and  from  that  time  forward  each  few  years  saw 


558  MODERN   ECONOMIC   TENDENCIES 

Borne  one  or  more  of  these  greater  nations,  or  the  United  States, 
becoming  engrossed  in  war,  either  with  some  major  dependency 
or  among  each  other.  It  was  not  until  the  year  1871  had 
brought  France,  Prussia  and  Austria  into  a  relationship  which 
was  to  prove  stable  for  some  time,  and  had  finally  united  the 
entire  Italian  peninsula  into  a  single  firm  monarchy,  that  com- 
parative peace  was  in  sight. 

In  the  United  States  we  had  only  one  war  during  this  period, 
it  is  true;  but  that  one  was  of  a  duration  and  intensity — one  of 
the  most  bitterly  fought  and  expensive  wars,  per  capita  of 
population  involved,  which  history  had  recorded  up  to  that  time 
— fit  to  match  the  virtually  continuous  twenty  years  of  tur- 
bulence enjoyed  by  Europe. 

But  the  year  1871  formed  a  turning-point  again  into  a  period 
of  comparative  calm.  The  list  of  conflicts  continues  there- 
after, but  they  become  relatively  unimportant.  There  ensues 
a  long  season  of  virtual  peace  extending  over  a  quarter  of 
a  century,  broken  only  by  the  minor  collision  between  Russia  and 
Turkey  in  1877-78,  the  distant  rumble  of  shock  between  Chili 
and  Bolivia,  or  petty  wars  between  some  major  power  and  dis- 
turbers of  its  colonial  peace  in  Asia  or  Africa. 

This  was  a  period,  in  both  Europe  and  America,  marked  by 
intense  industrial  and  commercial  expansion.  France,  under  the 
guidance  of  Thiers,  had  paid  off  the  huge  indemnity  required  by 
Germany  for  the  Franco- Prussian  war,  and  had  thus  rid  her  soil 
of  foreign  troops,  in  the  remarkably  short  time  of  four  years. 
The  horrors  of  arson  and  violence,  famine  and  pestilence  which 
had  scourged  Paris  during  the  terrible  Commune  gave  way,  with 
the  suddenness  of  contrast  between  extremes  which  is  character- 
istic of  all  social  evolution  in  times  of  national  crisis,  to  a 
condition  of  expansive  prosperity.  Within  a  generation  France, 
starting  from  a  degree  of  famine  and  poverty  wherein  dogs  and 
rats  commanded  high  prices,  for  food,  had  become  the  banker  of 
Europe.  Such  is  the  vitalizing  power  of  community-credit ! 

Simultaneously  Germany  was  glutting  herself  upon  the  fruits 
of  her  final  predominance  over  her  ancient  enemy,  Austria,  and 
her  more  recent  defeat  of  France,  and  gloating  over  her  new- 
found unity  of  empire.  England  and  Italy  were  developing 
commercially  in  only  less  dramatic  fashion. 

In  another  book,  wherein  the  natural  laws  underlying  social 
convulsion  and  evolution  may  be  studied  in  a  broader  way  than 


THE   COST   OF   LIVING 


559 


here,  it  will  be  shown  how  coercive  was  mechanical  invention, 
and  particularly  the  railway  and  the  telegraph,  in  forcing  the 
political  transformation  of  the  Europe  left  in  the  hands  of 
Metternich  and  Talleyrand,  by  the  collapse  of  Napoleon,  in  1815, 
into  that  inherited  by  Bismarck,  Gladstone  and  Thiers  in  1871. 
For  the  present  it  may  be  noted  merely  that  such  was  the  case. 

TABLE  66 
WARS  AND  REVOLUTIONS,  1850  TO  1914 


Year 


Countries  Involved 


1853-1856 

1856-1858 

1857-1858 

1859-1861 

1859-1860 

1861-1865 

1863-1865 

1864-1865 

1866 

1868-1869 

1870-1871 

1873-1875 

1876 

1877-1878 

1878-1879 

1879-1883 

1883-1885 

1894-1895 

1898-1899 

1899-1900 

1900 

1904-1906 

1912-1913 

1913-1914 

1914-1918 


England,  France  and  Turkey  vs.  Russia — the  Crimean 

War 

Great  Britain  and  France  vs.  China 
Sepoy  Rebellion  against  England  in  India 
Italy  (Piedmont)  and  France  vs.  Austria 
Spain  vs.  Morocco 
American  Civil  War 
France  vs.  Mexico 

Austria  and  Prussia  vs.  Schleswig-Holstein  and  Jutland 
Prussia  and  Italy  vs.  Austria 
Revolution  in  Spain 
France  vs.  Prussia 
Revolution  in  Spain 
Revolution  in  Turkey  and  the  Balkans 
Russia  vs.  Turkey 
England  vs.  Afghanistan 
Chili  vs.  Bolivia  and  Peru 
France  vs.  Annam 
China  vs.  Japan 
United  States  vs.  Spain 
England  vs.  Boer  Republics  in  South  Africa 
Chinese  "Boxer"  Rebellion 
Russia  vs.  Japan 
Balkan  War  with  Turkey 
Italy  vs.  Turkey 
The  Great  European  War 


In  the  grasp  of  the  huge,  inanimate  forces  of  social  gravitation 
which  were  let  loose  by  the  advent  of  the  steam-driven  factory, 
the  railway,  the  telegraph  and  all  which  came  with  them,  the 
most  powerful  individualities  in  European  history  dwindled  into 
puppets.  The  policies  of  Metternich,  Louis  Philippe  and 
Napoleon  III  all  failed.  Those  of  Bismarck,  Thiers,  Cavour  and 


560  MODERN   ECONOMIC   TENDENCIES 

Gladstone  won.  But  this  was  not  necessarily  because  of  any  altera- 
tion in  human  nature  within  the  two  or  three  decades  which 
intervened.  It  was  not  because  of  any  moral  or  psychic 
superiority,  nor  of  any  more  altruistic  concept  of  human  liberty, 
on  the  part  of  the  latter  statesmen,  but  because  the  former  stood 
for  the  perpetuation  of  the  disintegrated  Europe  left  by  the 
reaction  from  Napoleon's  unity,  enforced  temporarily  by  con- 
quest, whereas  the  latter  stood  for  that  permanent,  natural 
solidarity  which  was  demanded  unrelentingly  by  the  presence 
of  the  factory,  the  railroad  and  the  telegraph. 

Each  of  these  winning  statesmen  was  a  builder  of  railroads 
and  telegraphs.  Each  of  the  losing  ones  opposed  their  intro- 
duction. Invention  is  the  overlord  of  modern  national  destinies. 
For  two  centuries  previous  to  the  period  under  consideration, 
rising,  ambitious,  young  Prussia  had  striven  against  the  prestige 
and  power  of  well-established,  lordly  Austria,  for  the  dominant 
influence  in  the  Holy  Eoman  Empire.  With  the  final  evapora- 
tion of  the  last  vestige  of  that  Empire,  in  1810,  the  two  were 
free  to  continue  the  struggle  as  independent,  sovereign  powers. 
In  this  struggle  Austria  chose  the  policy  of  Metternich — of 
conservatism,  of  stern  repression,  of  rigid  censorship  of  the 
pulpit  and  the  press,  and  of  antagonism  to  every  mechanical 
innovation  of  the  Victorian  age.  In  one  sense — that  it  held 
together  a  conglomerate  empire  now  deprived  of  its  ancient 
cement,  the  common  fear  of  the  Turk — this  policy  worked.  But 
relatively  to  the  progressive  policy  of  Prussia  (which,  however 
far  from  ideal  freedom  of  press  or  ballot,  yet  encouraged  all 
modern  arts)  it  failed  miserably.  By  1866  the  contrast  between 
the  two  policies  had  come  to  a  head  in  the  signal  defeat  of 
Austria.  From  that  time  forward  Prussia's  arrogance  has  known 
no  bounds,  until  finally  it  has  met  in  battle  those  nations  which 
have  been  even  more  devoted  than  herself  to  the  development  of 
technical,  political  and  economic  progress. 

Nor  can  the  final  victory  of  our  modern  ideas  of  democratic 
liberty  over  the  cynical  practicalness  of  the  Metternich  school, 
which  we  like  to  feel  proved  the  supremacy  of  spirit  over  matter 
even  in  political  affairs,  be  explained  too  baldly  as  such.  For 
every  one  of  the  series  of  futile  revolutions  which  dotted  the 
history  of  Europe  during  the  first  half  of  the  Victorian  era  was 
imbued  with  this  spirit.  Yet  they  all  failed.  This  was  because 
they  did  not  yet  enjoy  full  alliance  with  those  tangible  appliances 


THE  COST  OF  LIVING  561 

of  modern  economic  life,  the  railway  and  the  telegraph  (with 
all  which  these  words  symbolize),  which  are  daily  coercing  unity 
upon  modern  mankind — while  he  struggles,  as  unnaturally  as  a 
salmon  trying  to  slink  downstream,  to  cling  to  his  obsolete  dis- 
gregation. 

Peace. — In  this  era  of  peace  following  1871  (1865  in  the 
United  States)  vast  industrial  enterprises  of  all  sorts  were  un- 
dertaken and  completed,  everywhere  in  the  western  world.  Vast 
sums  of  commercial  credit  were  evolved  to  correspond.  But 
simultaneously  the  burden  of  war-credits  was  systematically 
reduced. 

While  this  was  true  most  particularly  of  our  own  land,  it  was 
also  true  of  Europe.  Germany  alone  was  not  reducing  her 
military  budget,  in  proportion  to  her  growth  along  other  lines; 
but  she  relied  upon  taxation,  rather  than  upon  credit,  to  support 
that  huge  military  policy  which  had  been  inaugurated  with  such 
great  success  by  Bismarck  and  William  I  in  1863. 

England  expanded  her  navy,  it  is  true;  but  not  in  keeping 
with  her  commercial  expansion,  while  her  army  remained 
stationary.  France  gradually  became  the  banker  of  the  world, 
as  England  had  become  its  engineer  and  America  its  farmer. 
The  United  States  paid  off  its  war-debts  almost  entirely,  and 
laid  the  foundations  for  the  future  transfer,  in  1915,  of  the 
financial  capital  of  the  world  from  London  and  Paris  to  New 
York. 

War. — But  almost  exactly  a  quarter-century  after  the  peace 
of  1871  came  the  reaction.  Prefaced  by  the  distant  and  unpre- 
tentious war  between  China  and  Japan,  in  1894-95,  the  martial 
tendency  broke  forth  again  in  centers  closely  connected  with  the 
origins  of  world-prices  and  the  reservoirs  of  world-credits.  It 
began  with  our  own  war  with  Spain  in  1898,  continued  in  the 
Boer  War  in  1899  which  so  heavily  taxed  the  resources  of 
England — being  even  responsible  for  the  death  of  Queen  Vic- 
toria, it  is  said — and  culminated  in  the  Boxer  Rebellion  in  China 
in  1900,  the  first  military  enterprise  to  bring  the  troops  of  the 
United  States,  of  all  the  major  European  countries  and  of 
Japan  into  active  alliance. 

This  last  small  disturbance  affected  almost  every  power  in 
Europe,  more  by  its  political  uncertainties,  and  by  the  com- 
mercial uncertainties  resultant  therefrom,  than  by  the  amounts 
of  men  or  money  directly  involved.  For  the  truth  was  then 


562  MODERN   ECONOMIC   TENDENCIES 

vaguely  felt :  that  social  energetics  had  ceased  to  be  local  or  con- 
tinental, and  had  become  geodic.  The  coming  League  of  Nations 
had  cast  its  shadow  nineteen  years  forward,  as  a  warning  des- 
tined to  be  as  unheeded  as  all  other  warnings. 

The  decade  following  this  turmoil  was  broken  only  by  the 
Eusso-Japanese  war  of  1904-06,  as  a  major  disturbance,  it  is 
true;  but  that  conflict  was  significant  not  only  in  its  recording 
another  step  forward  in  the  scale  of  human  and  financial  mag- 
nitudes of  modern  wars,  but  also  in  its  further  signaling  the 
formation  of  a  world-community  by  modern  means  of  communi- 
cation, and  of  the  entrance  of  the  Far  East  into  membership 
therein.  The  treaty  signed  at  Portsmouth,  New  Hampshire, 
failed  to  embody  Japan's  apparently  sweeping  military  success, 
it  is  true;  but  this  was  only  because  that  success,  according  to 
report,  had  been  attained  at  the  cost  of  financial  exhaustion  to 
Japan.  Modern  wars  are  fought  with  money  and  credits  more 
than  they  are  with  men. 

The  second  decade  of  the  present  century,  although  not  yet 
finished,  will  undoubtedly  stand  as  one  of  the  stormiest  of 
modern  history.  From  its  beginning  it  has  witnessed  almost 
continuous,  bitter  warfare,  upon  a  scale  affecting  the  very 
foundations  of  civilization.  First  came  the  Balkan  Wars  of 
1911-12,  then  that  between  Italy  and  Turkey,  and  finally  the 
present  great  world-conflict,  unquestionably  the  most  gigantic 
in  men,  money  and  territory  involved,  ever  incurred  by  the 
human  race. 

War-Credits  and  Prices. — The  bearing  of  all  this  upon  the 
question  of  world-prices  is  this.  The  wars  immediately  follow- 
ing 1848  necessitated  the  diversion  of  men  from  productive  into 
military  lines  and  the  issue  of  enormous  volumes  of  govern- 
mental credits.  Both  of  these  processes,  but  particularly  the 
latter,  result  in  high  prices.  Prices  in  the  United  States  were 
more  directly  affected,  of  course,  by  our  own  Civil  War  than  by 
the  European  wars;  but  in  this  the  conditions  on  the  two  sides 
of  the  Atlantic  intensified  each  other. 

No  statistics  as  to  the  volume  of  these  governmental  credits 
are  available — particularly  since  they  must  be  reducible  to  a 
per-capita  basis  for  useful  comparison  with  those  already  ad- 
duced— because  of  the  vagueness  as  to  just  what  territory  and 
population  should  be  included.  But  it  is  certain  that  this  volume 


THE   COST   OF  LIVING  563 

of  governmental  credit  was  very  great  in  comparison  with  any 
quantities  of  commercial  credit  then  known. 

There  must  also  be  considered,  for  America,  the  repudiation 
by  the  South  of  its  portion  of  the  cost  of  our  Civil  War,  and  the 
complete  paralysis  of  that  rich  region  as  a  producer  for  years 
thereafter.  But  there  is  little  evidence  that  this  had  appreciable 
bearing  in  maintaining  prices,  except  for  cotton,  rice  and  a  few 
less  important  commodities.  The  South,  for  years  after  the  War, 
had  little  or  no  money,  traded  mainly  by  barter,  and  consumed 
little  beyond  what  was  locally  produced  at  home.  But  deficit  in 
production  seldom  figures  as  an  appreciable  cause  of  high  prices, 
in  comparison  with  credit. 

The  South  remained  poor  and  unproductive,  too,  not  because 
it  had  been  laid  waste ;  for  an  agricultural  district  like  the  South 
requires  no  such  a  slow  and  costly  re-equipment  with  structures 
and  appliances,  in  order  to  become  productive,  as  does  an  in- 
dustrial territory  like  France.  Yet  the  South  remained 
impoverished  for  two  decades  after  1865,  whereas  France  did  not 
continue  so  two  years  after  1871. 

The  South  remained  poor  in  money,  interchange  and  con- 
sumption, paralyzed  by  its  forced  restriction  to  barter  of  goods 
for  goods,  because  it  lacked  perception  of  the  vital  social  im- 
portance of  credit.  It  lacked  the  commercial  instinct  of  the 
North  to  appreciate  the  golden  value  of  having  debts.  For  it 
repudiated  its  war-debts,  and  hence  lost  its  credit.  Money 
fled  from  its  confines  as  a  bird  from  a  cage. 

If  the  South  had  only  funded  its  war-debts  and  shouldered 
merely  the  burden  of  paying  the  interest  thereon,  it  would 
have  possessed  immediately  a  volume  of  credit,  and  hence  of 
circulating-medium  based  thereon,  which  would  have  released 
its  productive  energies  to  a  degree  far  beyond  the  cost  of  the 
interest.  Its  economic  arteries  would  have  been  filled  with 
fluid.  Its  revival  would  have  been  prompt. 

Indeed,  the  interest  was  all  it  need  ever  have  paid.  For 
no  commercialist  ever  expects  to  pay,  or  does  pay,  the  principal 
of  his  debts.  That  is  the  last  thing  desired  by  the  commercial 
world.  He  pays  merely  the  interest,  refunding  the  principal 
every  time  it  falls  due — usually  with  a  sufficient  expansion  of 
the  principal  to  more  than  cover  past  interest-payments. 

But  the  trouble  was  that  the  South  lacked  a  basis  of  in- 
tangible credit  upon  which  to  maintain  the  usefulness  of  its 


564  MODERN  ECONOMIC  TENDENCIES 

credit-instruments,  had  it  decided  to  retain  them.  It  lacked 
the  aggressive  commercial  spirit  of  the  North.  The  South 
was  not  merely  defeated;  it  was  discouraged.  Worse  than  that, 
it  was  agricultural  and  non-commercial  in  spirit. 

The  high  prices  here  and  elsewhere  about  the  year  1870  were 
plainly  due  to  all  this.  The  enormous  issues  of  credit  for 
military  purposes,  setting  a  new  precedent  in  the  finances  of 
that  day,  had  immediately  become  dollars  active  in  the  market. 
The  volume  of  demand  was  momentarily  exaggerated.  Even 
if  production  had  remained  normal,  prices  would  have  risen. 

With  production  temporarily  decreased  they  rose  doubly. 
But  it  is  an  actual  fact  to-day,  as  then,  that,  even  when  pro- 
duction is  increasing,  if  the  expansion  of  credit  proceeds  more 
rapidly,  exaggerating  market-demand  more  rapidly  than  pro- 
duction expands,  then  prices  rise  while  production  increases. 
This,  indeed,  is  the  modern  situation. 

Further,  whereas  commercial  credits  may  not  be  issued  with 
a  rapidity  sufficient  to  disturb  prices  obviously,  else  the  securi- 
ties would  not  be  absorbed,  yet  governmental  war-credits  may 
be  issued  in  tremendous  volume,  at  unheard-of  rates,  yet  are 
absorbed  immediately  by  an  epidemic  of  patriotism.  Hence 
they  elevate  prices  more  rapidly  and  markedly,  although  no 
more  certainly,  than  do  commercial  credits. 

It  is  surprising,  for  instance,  to  find  American  bank-clearings 
in  1865  nearly  as  large  per  capita  as  in  1915,  since  the  volume 
of  transactions  in  commodities  could  not  then  have  been  more 
than  a  small  fraction  of  those  to-day,  owing  to  the  lack  of 
modern  facilities  for  communication.  But  they  figured  high 
enough  then,  because  of  the  high  prices,  to  counterbalance  the 
smaller  basis  in  goods.  Prices  were  high  everywhere. 

In  1870  prices  were  high  on  both  sides  of  the  Atlantic.  The 
steamship  and  the  new  Atlantic  cable  had  then  already  bonded 
the  two  continents  into  a  solidarity  such  as  to  enforce  unity 
in  economic  phenomena.  England  had  been  hit  by  our  Civil 
War,  through  the  paralysis  of  its  cotton-mills,  almost  as  hard 
as  we  ourselves.  Germany,  France  and  Austria  had  each  re- 
cently had  its  own  troubles. 

Peace  and  Commercialism. — But  during  the  three  decades 
of  peace  following  1865-70  all  of  these  tendencies,  so  far  as 
military  credits  were  concerned,  were  reversed  and  the  situation 
gradually  mended.  Men  returned  to  productive  vocations,  and 


THE   COST   OF   LIVING  565 

the  rapid  progress  of  invention  marvelously  multiplied  their 
effectiveness.  Governmental  thrift  paid  off  the  national  war- 
debts  and  canceled  the  outstanding  war-credits — in  contrast 
with  commercial  credits,  which,  in  effect,  are  never  canceled. 
For  the  time,  production  increased  more  rapidly  than  the  issue 
of  credit — which,  last,  indeed,  was  temporarily  reversed.  Pro- 
duction increased  faster  also  than  the  growth  of  competitive 
costs,  which  were  then  in  their  adolescence. 

Therefore  throughout  this  entire  period  prices  fell  and  wages 
rose.  It  was,  in  general,  a  period  of  contentment,  prosperity 
and  tangible  growth.  This  was  as  true  of  Europe,  as  far  east 
as  Germany  and  Italy,  as  of  America. 

In  the  United  States,  after  the  monetary  panic  of  1873,  there 
was  no  severe  economic  crisis  until  1907.  The  years  1885  and 
1893  brought  minor  depressions,  it  is  true,  and  1877,  1886 
and  1894  witnessed  huge  railway-strikes — each  following  a  de- 
pression. But  these  were  more  a  symptom  of  the  birth  of  the 
great  railway  labor-unions,  and  a  re-adjustment  of  wages  to 
fit  the  rapidly  altering  scale  of  railway-operation,  than  they 
were  significant  of  general  discontent  or  hard  times. 

Without  abandoning  the  major  position  so  often  taken  in 
these  pages — that  social  discontent  arises  from  causes  which 
have  been  at  work  continuously  since  before  the  Civil  "War — 
yet  it  is  still  true  that  this  long  period  of  peace  was,  relatively 
speaking,  a  time  of  economic  "catching  up,"  particularly  in 
this  matter  of  outstanding  interest-bearing  credits — a  period 
of  recuperation  from  the  wounds  of  mid-century  militarism, 
before  the  pressure  due  to  active  commercialism  had  become 
severely  felt.  Hence  prices  reached  their  minimum  about  the 
year  1895. 

The  Enthronement  of  Commercialism. — But  at  this  date 
the  declining  effect  of  past  militarism  became  overtaken  and 
revised  by  the  rising  effects  of  modern  commercialism.  Martial 
militarism  ceased  its  sway  over  our  lives,  and  gave  way  to  our 
modern  tyranny  of  commercial  militarism. 

For  already,  there  was  under  way  (as  shown  by  Tables  26 
to  32),  even  before  the  inauguration  of  this  period  of  declining 
prices,  the  process  which  finally  was  destined  to  counterbalance 
and  reverse  this  wholesome  process  of  recovery  from  unneeded 
volume  of  governmental  interest-bearing  credits.  This  was  the 
growth,  as  a  natural  product  of  political  peace,  and  accom- 


566  MODERN   ECONOMIC   TENDENCIES 

plished  through  active  mechanical  invention,  of  a  world-wide 
but  chiefly  American  drift  into  bitter  commercial  warfare — 
a  warfare  waged  with  the  use  of  and  for  the  control  of  that 
rising  tide  of  inventions  now  beginning  to  flood  the  land,  and 
accompanied  by  a  flood  of  new  commercial  interest-bearing 
credits. 

Although  this  tide  had  begun  its  gentle  flow  a  century  earlier, 
yet  it  was  not  until  well  along  in  the  nineteenth  century  that 
conditions  permitted  it  to  assume,  by  its  cumulative-  effects,  a 
dominant  magnitude — to  culminate  in  the  twentieth  century 
into  the  counterpart  of  a  tidal  bore  in  an  estuary,  sweeping  all 
before  its  advancing  wall  of  water.  Beginning  with  the  inven- 
tion of  the  cotton-gin  in  1795,  its  relation  to  the  culture  of 
cotton  forced  the  growth  of  negro-slavery  into  a  huge,  money^ 
making  abuse  and  coerced  us  into  the  Civil  War.  Beginning 
more  broadly  with  the  appearance  of  steam-power  and  the  fac- 
tory, fifty  years  before  Whitney's  cotton-gin,  its  relation  to  our 
broader  system  of  economic  distribution  has  yet,  even  to-day, 
to  work  out  its  culminating  coercion  of  our  destinies  in  drastic 
action. 

For  its  motive  force  is  accelerative.  Both  energy  and  re- 
sistance grow  apace.  From  the  clearing  of  the  political  atmos- 
phere about  1870 — due  in  this  country  to  the  close  of  our 
Civil  War  and  in  Europe  to  the  equilibrium  apparently  attained 
between  Germany,  Austria,  France  and  Italy  in  1871 — first  in- 
vention, and  then  commercialism  feeding  upon  invention,  be- 
came the  ruling  forces  in  the  guidance  of  world-civilization  to 
its  destiny. 

Since  1900,  if  never  before,  all  wars  have  been  largely  com- 
mercial in  their  source,  the  result  of  international  commercial 
competition.  Germany's  jealousy  of  England,  as  much  the 
fruit  of  the  commercial  expansion  of  both  of  them  since  1871 
as  of  Germany's  triumph  over  France  in  that  year,  is  as  pure 
an  instance  as  could  be  desired.  Yet  none  of  these  wars  have 
been  able  to  overshadow  their  parent — commercialism,  proper — 
in  the  quantums  of  energy  involved.  Huge,  costly  and  horrid 
as  they  have  been,  they  yet  stand  as  mere  incidents  to  that 
greater  internecine  conflict  called  "business." 

Thus,  of  these  military  wars  the  most  gigantic  specimen  still 
remains  unfinished.  Its  magnitude  in  pecuniary  cost  is  only 
now  beginning  to  appear;  for  the  Allies,  if  not  Germany  also, 


THE   COST   OF  LIVING 


567 


are  still  increasing  their  ability  to  produce  and  consume  muni- 
tions, and  the  bitterest  portion  of  the  war  is  yet  to  come. 

According  to  an  estimate  published  by  the  New  York  Times 
for  July  30,  1916,  the  first  two  years  of  this  war  had  already 
involved  the  issue  of  governmental  credits  amounting  to  fifty 
billions  of  dollars.  A  year  later  the  promise  is  indubitable  for 
these  credits  surpassing  one  hundred  billions,  and  perhaps 
doubling  that  figure,  before  the  war  is  over.5 

Attempt  to  reduce  this  burden  of  current  expenditure  to  a 
per-capita  statement,  for  comparison  with  our  other  data,  in- 
volves uncertainty;  but,  excluding  altogether  Russia's  vast  im- 
pecunious hordes,  it  still  amounts  to  only  one  or  two  hundred 
dollars  per  citizen  of  the  aggregated  countries  combined  for 
its  prosecution.  Compared  with  the  burden  of  credit  due  to 
the  commercial  warfare  of  recent  times  of  political  peace,  which 
was  already  endured  by  the  citizens  of  the  United  States  when 
this  martial  addition  appeared  (as  shown  by  Table  11),  this 
burden  of  interest-bearing  credit  due  to  military  warfare 
amounts  as  yet  (1916)  to  less  than  a  ten-per-cent  increase! 

The  warfare  of  fleets  and  armies,  huge  as  it  may  seem,  is  a 
small  matter  when  compared  with  that  waged  between  the  rival 
corporations  and  competing  corner-grocers,  when  lumped  in 
aggregate.  For  the  former  fluctuates  from  day  to  day,  becom- 

5  On  October  21,  1917,  the  New  York  Times  quotes  estimates  made 
by  the  Mechanics  and  Metals  National  Bank  to  the  effect  that  the  cost  of 
the  war  had  already  reached  the  sum  of  one  hundred  billions  of  dollars. 
Daily  expenditures  are  estimated  at  $160,000,000.  The  annual  cost 
per  capita,  as  compared  with  income,  is  listed  as  follows: 

TABLE  66 
RELATIVE  COST  OP  WAR,  PER  CAPITA 


Annual  Cost 

Annual  Income 

United  States 

$103  80 

$385  00 

Great  Britain 

279  60 

255  00 

France  

180.00 

187.00 

Russia  

36.60 

40.00 

Italy  .                         

80.60 

111.00 

On  January  1,  1919,  the  Times'  estimate  of  our  total  war  cost  was 
"$22,590,000,000  and  still  growing." 


568  MODERN   ECONOMIC   TENDENCIES 

ing  intense  only  occasionally  and  locally ;  but  the  latter  is  fierce 
and  unremitting  at  all  times  and  places.  The  former  involves 
only  a  part  of  the  men  of  military  age ;  the  latter  includes  both 
sexes  and  all  ages  above  childhood.  This  is  why  the  Great  War 
has  made  itself  felt  upon  our  domestic  affairs  as  little  as  it  has, 
and  why  the  advent  of  peace  may  be  expected  to  act  likewise. 

Let  no  one  deceive  himself  as  to  these  relative  magnitudes. 
At  the  present  time  England's  share  alone  in  the  current  ex- 
pense of  the  war  amounts  to  only  thirty-odd  millions  of  dollars 
per  day,  or  around  ten  billion  per  year.  Our  own  military 
expenditure,  although  profuse,  cannot  exceed  this  by  more  than 
a  quarter.  Yet  this  book's  most  conservative  estimate  of  the 
current  cost  of  our  own  internal,  internecine  commercial  war- 
fare called  business  (based  upon  Tables  38  and  39,  and  ex- 
cluding all  indirect  losses)  amounts  to  nearly  twice  this  fearful 
drain  of  strength!  If  we  accept  Note  1  as  our  guide  this  ratio 
must  be  several  times  larger  still ! 

From  the  way  we  feel,  in  spite  of  this  current  hemorrhage 
of  economic  life-blood,  we  may  judge  somewhat  of  what  our 
potential  strength  might  be,  if  untapped  by  commercialism! 

The  Replacement  of  Martial  with  Commercial  Mili- 
tarism.— Thus  the  social  evolutionary  process  of  the  past  fifty 
or  sixty  years  has  consisted,  in  the  first  place,  in  the  gradual 
reduction  of  the  war-prices  of  the  mid-victorian  period  by  the 
healing  powers  of  political  peace,  regardless  of  the  simultane- 
ous but  slow  rise  of  commercial-ism,  which  was  then  only  getting 
under  way.  But  by  about  1895  the  latter  factor  had  overtaken 
and  counterbalanced  the  former.  Commercial  warfare  first 
equaled,  and  then  excelled,  its  military  progenitor  in  cost. 

Thus  the  falling  prices  first  became  stationary,  and  then 
rose  again.  Ever  since  that  year  they  have  been  rising  at 
accelerating  rates,  in  parallel  with  the  growth  of  every  other 
feature  of  commercial  militarism,  at  a  rate  unequaled  by  any 
other  institution  of  modern  civilization. 

Yet  now  this  accelerative  rise  in  prices  due  solely  to  com- 
mercialism is  to  be  augmented  by  that  due  to  a  fresh  outburst 
of  old-fashioned  militarism,  quite  in  addition  to — or  even  as 
fresh  fuel  for — our  increasing  modern  commercial  militarism! 
What  may  not  the  economic  tension  be,  after  the  war? 

This  great  and  rapidly  growing  aggregate  of  tangible  credit- 
instruments,  set  forth  in  part  in  Fig.  1,  will  soon  be  seen  to  be 


THE   COST  OF  LIVING  569 

the  key  to  an  understanding  of  our  entire  social  structure,  its 
equilibrium  and  its  future  action.  Although  active  commer- 
cialism, or  entropits,  with  its  rapidly  growing  quota  of  direct 
and  contributive  costs,  will  always  remain  the  key  to  the  enigma 
of  social  dynamics,  yet  our  inflated  credit-system — essential  yet 
delicate,  forming  the  tremulous  support  for  the  arena  whereon 
is  fought  out  all  this  active  commercialism — will  always  remain 
(until  its  sudden  collapse)  the  balloon  supporting  our  very 
wobbly  social  statics.  Yet  for  this  function  it  is  now  about 
as  ideally  fitted  as  a  blimp  would  be  as  a  roadbed  for  a 
locomotive ! 

While  the  analysis  of  the  social  dissipation  of  economic 
energy  which  was  completed  in  Tables  27  to  47  deserves  the 
role  there  assigned  to  it,  as  our  primary  guide,  yet  this  vast, 
delicate  credit-structure,  built  of  swelling  securities  measured 
in  shrinking  dollars,  must  be  recognized  as  its  chief  vehicle 
of  expression.  So  long  as  commercial  credit  remains  inflated 
there  will  be  no  revolution.  But  when  it  fails  we  must  expect 
as  sudden  and  spectacular  a  collapse  of  civilization  as  when 
a  balloon  gives  way  in  mid-air  from  over-distention. 

The  Cumulative  Nature  of  Commercialism. — Thus  by  the 
mere  issue  of  interest-bearing  securities,  with  permission  to  do 
so  requested  only  from  the  bankers,  lambs  and  brokers  who 
constitute  their  first  purchasers,  money  has  been  squeezed  from 
the  public,  beyond  any  conceivable  accounting  of  just  return 
in  the  way  of  service,  and  piled  in  the  hands  of  the  few.  These 
again  exact  from  the  public,  in  return  for  that  necessity  of 
social  life  called  fluid  credit,  interest  upon  its  own  money,  in- 
definitely and  cumulatively. 

Thus  a  current  flood  of  new  interest-bearing  securities,  most 
of  them  additional  to  those  previously  outstanding,  and  now 
amounting  to  from  one  to  three  hundred  millions  per  month, 
is  being  constantly  thrown  upon  the  market — chiefly  through 
New  York  City  alone,  which  acts  in  this  respect  as  the  agency 
for  the  country.  This  constantly  fluctuating,  yet  always  posi- 
tively growing  and  rapidly  accumulating  burden,  is  determined, 
as  to  its  volume  from  day  to  day,  solely  by  the  ability  of  the 
Consuming  Public  to  pay  these  interest-charges  (with  entropits 
added)  while  still  continuing  to  purchase  commodities. 

This  ability  is  being  continually  delicately  gaged,  under  the 
principle  of  charging  (or  in  this  case,  issuing)  all  which  the 


570  MODERN   ECONOMIC   TENDENCIES 

traffic  will  bear.  The  whole  machinery  of  stock-exchanges, 
brokers,  tickers  and  hourly  editions  of  daily  journals  bearing 
financial  quotations,  is  but  an  accessory  to  this  process  of  de- 
termining, daily  and  hourly,  what  burden  the  traffic  in  com- 
munity-credit will  actually  bear. 

This  vast  system  of  credit,  thus  growing  upon  us  from  day 
to  day  without  our  conscious  consent,  yet  to  the  maximum  of 
our  strength  to  endure,  is  alike  our  support  and  our  burden, 
our  servant  and  our  despot.  Upon  its  stability  and  fluidity  from 
day  to  day  depends  the  ability  of  each  workman  to  labor,  each 
merchant  to  sell  and  each  Consumer  to  buy.  As  conditions  are 
now,  interchange  between  these  three  elements  of  economic 
society  can  occur  only  through  its  delicate  web  of  sensitive 
lines  of  communication. 

Credit  as  the  Social  Catalytic. — It  is  this  catalytic  function 
of  credit,  vital  in  a  highly  specialized  modern  community,  which 
escaped  the  keen  mind  of  Eussell  Sage  and  gave  the  lie  to  his 
gloomy  predictions.  An  adequate  system  of  fluid  credit  is 
not  only  a  necessity,  but  a  powerful  stimulant,  to  trade.  False 
as  is  the  plan  of  our  present  system,  and  burdensome,  degrad- 
ing and  menacing  as  are  its  growing  interest-charges,  yet  it 
stands  as  evidence  that  some  system  of  fluid  credit,  resting 
upon  a  basis  far  outspanning  any  paltry  fund  of  gold,  is  as 
essential  to  our  national  economic  life  and  growth  as  unnutritive 
water  is  to  the  human  body. 

Production,  in  the  body  economic,  is  what  food  is  in  the 
body  physical.  But  food  without  water  would  choke  the  in- 
dividual body  no  more  certainly  than  a  gorged  effort  at  pro- 
duction, without  commensurate  fluid  credit — and  without  an 
elaborate  system  for  identifying  the  individual  Consumer  for 
each  article — would  choke  the  social  physiognomy.  It  is  the 
lack  of  any  adequate  system  of  fluid  credit,  and  not  its  element 
of  collectivism,  which  marks  the  impracticability  of  socialism 
— a  doctrine  which  bases  its  whole  philosophy  upon  the  as- 
sumption that  production  performed  by  the  individual  at  the 
bench  is  the  sole  life-supporting  process  of  modern  com- 
munity-life. 

Modern  economic  metabolism — comprising  within  one  term 
production,  interchange  and  consumption — can  now  no  longer 
occur  through  the  crude  medium  of  barter,  the  earliest  known 
means  for  economic  interaction,  in  primitive  savage  communi- 


THE  COST  OF  LIVING  571 

ties;  nor  through  coin  alone,  the  next  step  towards  indirect- 
ness and  fluidity,  for  thousands  of  years  the  reliance  of  the 
earlier  civilizations;  nor  through  token-money  based  only  upon 
coin  and  bullion,  as  a  century  ago;  nor  even  through  stocks, 
bonds  and  mortgages  alone,  as  our  first  modern  devices  for 
reliance  upon  our  general  wealth  (as  contrasted  with  gold)  as 
the  basis  for  our  circulating-medium.  Instead,  to-day,  in  our 
vast  and  intricate  population,  covering  several  continents  as 
one  community,  the  utmost  ramifications  of  our  present  credit- 
system — into  personal  notes,  bills  of  lading,  warehouse-receipts, 
bank-discounts,  acceptances,  sustained  accounts,  and  what  not 
— must  each  perform  its  part,  quite  in  addition  to  coin,  bullion, 
paper-money,  checks,  bonds  and  stocks,  else  the  mill  and  its 
workmen  must  stand  idle,  the  railway-trains  and  steamships 
must  halt,  the  merchant's  shutters  must  go  up  and  the  Con- 
sumers must  starve.  Every  partial  collapse  of  valuations  in 
Wall  Street  has  stood  witness  to  a  partial  instance  of  this  fact. 

Up  to  the  present  time  the  usefulness  of  having  a  credit- 
system  capable  of  rapid  and  indefinite  expansion,  and  possessing 
the  novel  attribute  of  a  foundation  upon  general  wealth  rather 
than  upon  gold  alone,  has  largely  counterbalanced  the  hideously 
inequitable  and  foolish  burden  of  interest-charges,  and  combat 
over  them,  which  has  accompanied  it.  Lacking  a  more  natural 
system  of  fluid  credit,  these  copious  outpourings  of  negotiable, 
interest-bearing,  commercial  securities  have  served  our  body 
economic  as  an  injection  of  active  blood — or  at  least,  of  a 
"normal  salt-solution" — would  serve  in  the  otherwise  desanguin- 
ated  arteries  of  trade. 

Indeed,  it  is  this — aided  by  that  invaluable  freedom  of  trade 
between  the  several  States,  of  the  importance  of  which  we  have 
ceased  to  be  conscious — which  alone  has  enabled  us  to  endure 
that  growing  burden  of  parasitical  commercialism  revealed  by 
our  tables  of  historical  statistics.  For  -the  circulatory  credit- 
function  of  these  securities  is  purely  a  helpful  one,  in  diametric 
opposition  to  their  commercial  function,  namely,  the  extortion 
of  interest,  dividends  and  surplus  from  the  Ultimate  Consumer. 

But  the  time  is  now  perilously  near  at  hand  when  this 
burden  of  accompanying  interest-charges  and  commercial  com- 
bat shall  have  overbalanced  the  good  embodied  in  the  under- 
lying fluidity  of  credit.  But  this  overbalance,  when  it  comes, 
cannot  appear  in  any  gradual  manifestation  of  distress  (except 


572  MODERN   ECONOMIC   TENDENCIES 

indirectly,  to  those  who  have  eyes  to  see),  with  a  gradual 
adjustment  to  meet  it  calmly.  Our  ship  of  state  is  like  a 
literal  ship  which  tries  increasingly  to  carry  its  freight  upon 
the  hurricane-deck,  piling  it  up  there  ever  in  greater  and  greater 
ostentation — unable  to  perceive  that  it  is  just  as  valuable,  or 
far  more  so,  when  hidden  in  the  hold. 

Our  deck-load  of  commercialism,  artificial  antagonism,  sys- 
tematic display,  and  distortion  of  every  civic  naturalness  to 
please  the  god  of  profits,  has  now  all  but  reached  its  limits. 
When  it  gets  too  high  the  ship  will  turn  turtle — not  gradually, 
as  we  would  fain  have  it  do,  sliding  us  off  into  a  summer-sea 
in  bathing-suits,  there  to  disport  ourselves  while  kind  steve- 
dores correct  the  list  for  us — but  suddenly  and  completely, 
bottom  up  and  funnels  down,  launching  our  entire  deck-load 
of  ownership-in-industry,  commercial  combat,  congested  slums 
and  inflated  aristocracy,  with  a  pitiable  escort  of  innocent 
humanity,  into  the  deep-sea  abysses  of  eternal  oblivion. 

Taxation. — But  before  leaving  finally  the  topic  of  the  cost 
of  living,  a  page  or  so  must  be  devoted  to  one  simple  element 
therein  which  recently  has  been  allowed  to  figure  far  more 
prominently  than  it  should.  This  is  the  matter  of  taxation. 

A  great  deal  of  protest  is  heard  these  days  against  the  way 
in  which  federal  and  local  governments  are  run,  based  upon 
the  fact  that  taxes  everywhere  are  rising.6  Editors  and  cam- 
paign-speakers are  particularly  guilty  in  this  direction.  Many 
a  recent  city-government  has  been  installed  primarily  upon  a 
demand  for  lower  taxes. 

But  the  economic  facts  do  not  offer  any  support  for  regard- 
ing any  such  a  false  thrift  in  the  restriction  of  taxation  as 
wise.  Because  this  whole  line  of  agitation  is  most  unwhole- 
some, in  its  blindfolding  of  the  public  eye  to  considerations 
of  far  greater  importance,  the  facts  and  the  philosophy  under- 
lying taxation  will  be  reviewed  briefly,  before  taking  up  the  sub- 
ject of  unemployment. 

The  prime  fact  underlying  an  understanding  of  the  problem 
of  taxation  is  that  the  Ultimate  Consumer  is  the  sole  payer 
of  all  taxes.  All  taxes  paid  by  any  corporation  or  businessman 
are  always  charged  up  as  one  of  the  "costs  of  doing  business," 
a  profit  then  added,  and  finally  the  whole  collected  from  the 
Consumer  across  the  shop-counter.  The  complaint  of  any 
6Reference  is  had  here  to  normal,  pre-war  conditions. 


THE   COST  OF  LIVING  573 

business  against  high  taxes  has  no  foundation  whatever.  The 
business  does  not  pay  the  tax;  it  is  its  Consumers  who  do  so. 

The  fact  of  next  importance  is  that  taxes  are  always — sup- 
posedly, at  least — spent  to  aid  the  life-support  of  the  Ultimate 
Consumer.  That  is  to  say,  governmental  officials  at  least  pre- 
tend to  spend  the  money  entrusted  to  them  for  the  benefit  of 
the  tax-payer;  and  the  bulk  of  it  is  so  spent.  There  is  very 
little  pure  graft  to-day,  relatively  to  modern  scales  of  business. 

But  the  businessman,  on  the  other  hand,  makes  little  or  no 
such  pretense.  The  open  aim  of  business  is  to  fight  one's  com- 
petitor, to  "get  the  business"  (whether  it  be  to  the  public  ad- 
vantage for  him  to  get  it  or  not)  and  to  make  profits  or 
dividends.  There  is  no  positive  denial — although  plenty  of  dis- 
ingenuous concealment — of  the  making  of  profits  and  dividends, 
and  of  the  diversion  of  the  Consumer's  money  into  "costs  of 
doing  business."  There  is  plenty  of  indignant  asseveration  of 
the  righteousness  of  profits  and  dividends;  yet  a  most  peculiar 
reluctance  to  permit  the  public  to  know  whether  they  exist  or 
not,  or  how  they  have  been  secured. 

That  is  to  say,  public  officials  start  out  to  spend  the  people's 
money  for  the  people,  and  succeed  fairly  well.  Commercialists 
start  out  to  line  their  own  pockets  at  the  people's  expense,  and 
succeed  fairly  well.  The  fact  that  the  latter  do  not  succeed 
altogether,  because  obliged  to  divert  some  of  the  Consumer's 
money  into  supplying  him  what  he  wants,  should  not  be  charged 
up  against  the  commercialists  too  severely.  It  may  be  the 
fault  of  weak  human  nature,  but  it  certainly  is  not  that  of  the 
system  under  which  the  commercialist  works. 

Now  all  monies,  whether  spent  across  the  shop-counter  or 
paid  in  the  form  of  taxes,  which  further  the  life-support  of  the 
Ultimate  Consumer  cannot  elevate  prices.  Inevitably  they 
lower  them.  That  is  the  only  way  in  which  life  is  facilitated 
in  the  economic  world,  and  all  facilitation  of  life  lowers  prices. 

Therefore  no  commercialist  can  urge  his  payment  of  taxes 
as  an  excuse  for  his  charging  high  prices.  The  more  he  pays 
in  taxes  the  richer  is  every  citizen  in  governmental  aids  to  life 
and  production,  and  the  less  will  become  the  natural  cost  of 
his  produce.  It  is  only  because  the  commercialist's  produce  is 
not  sold  at  natural  cost  that  he  has  to  raise  his  price  as  he 
pays  more  taxes. 

If,  as  he  alleges,  he  finds  his  costs  rising  as  he  pays  higher 


574  MODERN   ECONOMIC  TENDENCIES 

taxes,  it  is  because  he  has  allowed  commercial  costs  to  add 
themselves  increasingly  to  natural  costs,  in  the  businesses  con- 
tributory to  his  own,  faster  than  increasing  taxation  has  re- 
duced natural  costs ;  and  for  that  fault  he  is  more  reprehensible 
than  is  any  other  class  of  society,  because  he  knows  the  game 
better.  It  is  as  a  Consumer,  and  not  as  a  purveyor,  that  every 
man  carries  his  heaviest  social  responsibility.  For  his  produc- 
tion is  largely  an  individual  act,  but  his  purchases  are  purely 
social  ones. 

Then  if,  as  he  also  alleges,  taxes  are  largely  misspent,  his 
obvious  remedy  is  not  to  cut  down  the  taxes,  but  to  contribute 
his  superior  ability  toward  securing  their  proper  expenditure. 

Conversely,  all  monies,  whether  spent  across  the  shop-counter 
or  paid  in  the  form  of  taxes,  which  are  diverted  into  waste, 
whether  commercial  or  political — profits,  dividends,  advertising, 
graft,  lobbying,  etc. — inevitably  become  the  source  of  high 
prices.  For  the  Consumer,  before  he  can  acquire  commodities, 
must  pay  their  natural  cost  plus  this  tax,  tribute  or  waste. 

Therefore  the  question  to  be  answered  to  himself  by  every 
Consumer  and  tax-payer  is  this:  In  the  payment  of  taxes  to 
the  government,  both  public  opinion  and  the  law  dictate  their 
expenditure  wholly  for  my  good — except  in  so  far  as  they  are 
devoted  to  the  payment  of  interest  upon  bonds.  It  is  true  that 
to  some  slight  degree  human  frailty  may  defy  these  considera- 
tions, and  may  waste  a  part  of  the  money;  but  in  major  part 
it  is  well  spent  in  my  interest. 

But,  on  the  other  hand,  when  I  pay  money  across  the  shop- 
counter  to  a  commercialist,  both  public  opinion  and  the  law 
uphold  and  encourage  him  in  his  waste  of  a  huge  and  increasing 
fraction  thereof,  in  the  form  of  profits,  dividends  and  the  costs 
of  competition.  In  which  direction  am  I  more  likely,  there- 
fore, to  receive  efficient  return? 

The  choice  of  every  sensible  man  must  be  in  favor  of  spend- 
ing his  money  in  the  form  of  taxes;  for  in  the  business- world 
the  Consumer's  money  is  always  spent  just  as  inefficiently  as 
human  nature  will  tolerate — namely  "all  the  traffic  will  bear/' 
The  efficiency  maintained  within  the  privately  owned  factory  or 
office,  by  the  policies  of  commercialism,  is  of  course  very  high. 
But  of  what  good  is  this  to  the  Consumer,  when  the  inefficiency 
of  every  transfer  of  either  goods  or  money  between  said  factory 


THE   COST  OF  LIVING  575 

and  the  Consumer  is  already  appallingly  low,  and  is  rapidly 
decreasing  ? 

Moreover,  the  public  expenditure  of  the  Consumer's  tax- 
money  is  at  least  partially  under  his  control.  But,  should  he 
wish  to  irvestigate  the  efficiency  with  which  his  shop-counter 
money  is  expended  by  any  commercial  organization,  he  finds 
that  he  possesses  no  legal  right  to  force  open  a  single  ledger. 
It  is  all  "private  business" — although  he  has  contributed  every 
cent  hidden  within  it  coffers ! 

In  comparison  with  such  economic  despotism  as  this,  taxes 
which  might  be  spent  by  a  political  government  with  an  effi- 
ciency as  low,  let  us  say,  as  seventy-five  per  cent — with  only 
one-quarter  wasted  in  graft — are  a  veritable  bonanza  to  him. 
For  he  has  at  least  some  chance  of  raising  that  figure.  But 
in  the  commercial  world  the  efficiency  in  terms  of  the  Consumer 
is  already  as  low  as  twenty  per  cent,  and  is  rapidly  growing 
lower;  and  over  its  further  fall  the  Consumer  has  no  control 
whatever ! 

Because  of  the  modern  growth  of  populations,  and  of  the 
facilities  for  transportation  and  communication  which  cement 
them  daily  into  greater  solidarity,  the  -whole  trend  of  modern 
affairs  is  toward  the  government's  assumption  of  services  and 
responsibilities  which  previously  were  individual.  This  process 
is  not  proceeding  at  anything  like  the  rate  of  growth  of  com- 
mercialism, and  commercial  decentralization,  but  it  is  proceed- 
ing. That  which  was  everybody's  or  nobody's  business  yester- 
day has  become  to-day  a  vital  factor  in  the  lives  of  millions. 

Therefore  the  proportion  of  our  annual  expenditures  which 
are  collected  in  the  form  of  taxes,  rather  than  across  the  shop- 
counter,  naturally  should  increase,  and  without  protest  on  the 
part  of  the  tax-payer.  Nevertheless,  in  deference  to  a  wide- 
spread prejudice  against  taxation,  and  to  show  its  true  relation 
to  our  commercial  burdens  of  tribute,  Table  67  is  inserted 
here  to  show  the  percentage  of  each  Consumer's  mean  annual 
expenditure  (as  taken  from  Table  43)  which  goes  to  pay 
taxes.  The  data  are  available  only  from  cities  of  a  population 
of  30,000  or  more,  and  are  given  here  only  for  the  year  1915 — 
at  which  date  the  Consumer  was  being  obliged  (as  shown  by 
Table  45)  to  divert  at  least  49  per  cent  of  his  total  expenditures 
across  the  shop-counter  into  tribute  to  commercial  anarchy; 


576 


MODERN  ECONOMIC  TENDENCIES 


with  a  probability,  as  shown  by  Note  1,  that  this  waste  actually 
runs  as  high  as  70  or  80,  or  even  more,  per  cent. 

The  middle  column  of  Table  67  shows  the  total  political 
revenue,  including  that  derived  from  fines,  forfeits  and  escheats, 
from  subventions,  grants,  donations  and  pension-assessments, 
from  highway-privileges,  rents  and  interest  going  to  govern- 
ments, and  from  earnings  of  general  departments  and  public- 
service  enterprises,  as  well  as  from  true  taxation.  The  last 
column  gives  the  portion  of  this  which  is  derived  directly 
from  the  Consumer,  in  the  form  of  property  and  other  taxes, 
and  by  special  assessments. 

TABLE  67 

PERCENTAGE  OF  PUBLIC  REVENUE  AND  TAXES  TO  CONSUMER'S  TOTAL 
EXPENDITURE  PER  CAPITA  PER  ANNUM,  1915 

(Consumer's  Total  Expenditure,  $403 ;  Tribute  to  Commercial 
Anarchy,  $198) 


Size  of  City 

Total  Revenue 

Direct  Taxation 

30,000  to    50,000  

5  52 

4  25 

50,000  to  100  000 

5  35 

4  09 

100,000  to  300  000 

6  36 

4  92 

300,000  to  500,000  

9  21 

6  98 

Over  500  000 

8  70 

6  68 

With  only  five  or  ten  per  cent  of  our  money  paid  as  taxes 
to  our  political  governments,  which  unquestionably  spend  the 
greater  part  of  it  for  useful  purposes,  there  is  little  ground 
for  complaining  longer  about  taxes,  while  swallowing  without 
protest  our  gigantic  commercial  tribute  in  the  form  of  in- 
terest, dividends  and  contributory  costs,  not  one  cent  of  which 
comes  back  to  us  in  any  useful  form. 

Moreover,  Table  67  applies  only  to  dwellers  in  town,  whereas 
it  is  unquestionable  that  the  country-dweller  pays  less  taxes. 
But  the  country-dweller  pays  the  same  commercial  tribute  as 
the  town-dweller.  Since  Table  17  shows  that  the  proportion 
of  the  total  population  dwelling  in  communities  smaller  than 
30,000  people  varied  from  about  91  per  cent  in  1850  to  some 
67  per  cent  in  1910,  it  is  probable  that  the  average  Consumer 


THE   COST  OF  LIVING  577 

pays  out  not  over  three  or  four  per  cent  of  his  total  expenditure 
in  the  form  of  taxes,  whereas  he  pays  at  least  49  per  cent,  in 
1915,  and  perhaps  81  per  cent,  in  the  form  of  commercial 
tribute! 

Table  41  also  corroborates  this  view,  by  showing  that  the 
proportion  of  governmental  (including  State,  county  and 
municipal)  indebtedness  to  commercial  indebtedness  varied 
from  4.7  per  cent  in  1880  to  3.0  per  cent  in  1910.  It  is  probable 
that  the  net  rates  of  interest  on  the  two  sorts  of  debt  are  much 
the  same. 

Table  67  therefore  gives  the  lie  to  one  of  the  most  common, 
and  to  the  serious-minded  citizen  the  most  exasperating,  of  all 
the  tricks  of  the  politician  of  the  day,  in  his  efforts  to  please 
his  true  clients,  the  commercialists :  That  of  appealing  to  the 
voter  as  a  tax-payer  to  keep  down  taxes — or  to  commission  him 
to  do  so — at  the  price  of  arrested  public  works.  But  his  appeal 
is  based  upon  the  most  short-sighted  parsimony,  and  paralyzes 
that  most  important  of  all  sorts  of  progress  in  civilization, 
namely,  the  increase  of  public  activities  as  people  come  to  live 
in  larger  and  larger,  and  more  congested,  communities,  cemented 
ever  more  closely  by  improving  facilities  for  transit  and  com- 
munication. 

The  present  policy  of  the  average  tax-payer,  in  voting  into 
office  those  who  promise  "economy  in  public  expenditure"  when 
what  the  tax-payer  most  needs  is  a  continual  expansion  of 
public  expenditures — while  this  same  voter  ignores  the  far 
greater  waste  of  his  money  through  commercialism — reminds  one 
inevitably  of  him  who  "blows  in"  thousands  for  champagne- 
suppers  and  then  calls  upon  his  wife  to  make  it  up  by  economy 
in  the  use  of  soap. 


PART  IV 
SOCIAL  REACTIONS 


CHAPTER  XX 

UNEMPLOYMENT 

WE  have  now  all  but  completed  the  review  of  the  economic 
anatomy  of  society,  in  its  most  material  and  mechanical,  but 
its  dominant,  sense.  For,  just  as  no  artist  can  portray  the 
draped  figure  with  success  without  first  knowing  the  skeleton, 
and  secondly  the  nude,  so  it  has  been  proper  to  place  first  in 
this  analysis  of  our  social  physiognomy  a  study  of  those  rigid, 
statistical  bones  and  unattractive  organic  definitions  of  the  body 
economic  which  have  always  given  to  the  study  of  political 
economy  a  repulsive  aspect,  yet  with  which  we  have  been  forced 
to  fill  the  earlier  portions  of  this  book. 

But  the  next  step  is  to  clothe  these  things  with  some  living 
beauty  of  rounded  flesh  and  grace  of  motion — to  connect  this 
mechanical  anatomy  of  production,  trade,  competition  and 
credit  more  directly  with  human  life  and  happiness  than  has  yet 
been  practicable.  In  order  to  do  this  there  now  remains  only 
one  additional  factor  to  be  considered.  This  is  the  topic  of 
employment  and  unemployment. 

This  factor  is  the  prime  connecting  link  between  our  relent- 
less economic  environment  and  the  ethical  results  which  give 
evidence  of  what  it  has  molded  us  into,  socially  speaking.  No 
person  may  lay  claim  to  any  understanding  of  the  predictable 
workings  of  social  evolution  who  has  not  grasped  this  matter 
of  unemployment,  as  a  natural  feature  of  our  social  metabolism. 

The  Source  of  Economic  Power. — In  these  foregoing  paws 
the  Ultimate  Consumer  has  been  granted  his  fullest  conceivable 

579 


580  MODERN   ECONOMIC  TENDENCIES 

rights  (in  his  capacity  as  purchaser)  as  inborn  sovereign  over 
all  those  whom  he  hires,  as  he  buys,  to  supply  him  with  what 
he  selects.  But  the  Consumer  cannot  be  a  purchaser  at  all,  in 
any  stable  sense,  unless  he  first  enjoys  employment. 

The  first  measure  of  the  economic  perfection  of  a  nation  is 
the  degree  to  which  each  dollar  buys  its  full  value  in  the  open 
market;  therefore  this  topic  has  properly  been  placed  first.  But 
only  second  to  that,  as  a  measure  of  the  civilization  built  thereon, 
is  the  certainty,  continuity  and  justice  with  which  that  nation 
awards  or  permits  employment — distributing  it  with  the  utmost 
liberty  of  choice  on  the  part  of  the  workman,  and  with  justice 
of  reward  and  freedom  from  oppression,  yet  most  rigidly  re- 
quiring productive  effort  as  a  prerequisite  to  purchasing-power. 

The  right  to  regular  employment  is  one  of  the  basic  rights 
of  man.  It  is  so  because  activity  is  as  normal  an  essential  to 
the  pursuit  of  life  and  happiness  as  is  food,  rest  or  legal  justice. 

During  the  various  periods  of  human  oppression  in  past 
history  no  adequate  statement  of  this  basic  right  of  man  has 
ever  been  voiced,  because  that  particular  species  of  oppression 
has  never  before  prevailed,  as  an  institution.  Under  serfdom, 
slavery,  feudalism  or  any  other  politically  oppressive  system  of 
the  past,  which  repressed  labor  by  tying  it  to  a  given  locality, 
there  has  never  been  any  complaint  of  unemployment. 

It  was  only  as  the  peasant  became  freed  from  the  soil  that 
he  became  the  slave  of  unemployment.  With  the  relatively 
novel  license  of  every  man  to  roam  the  land  in  search  of  the 
task  which  pleased  him  best,  came  simultaneously  the  irre- 
sponsibility of  the  employers  for  the  engagement  of  all  who 
might  present  themselves  for  work. 

Later  on,  as  opportunity  developed,  this  same  liberty  of  choice 
has  led  labor,  in  increasing  numbers,  to  the  selection  of  the  more 
lucrative  occupations  of  commercialism,  in  preference  over  the 
more  poorly  paid  productive  ones ;  and  this,  we  shall  see,  results 
in  a  further  general  deficit  in  demand  for  work  on  the  part  of 
the  employers. 

The  revolution  of  1848,  which  was  the  first  one  of  magnitude 
to  be  instigated  chiefly  by  modern  economic  conditions,  as  the 
result  of  invention,  was  the  first  to  £ive  articulate  voice  to  the 
demand  for  employment.  But  this  revolution,  however  economic 
it  may  have  been  in  part  of  its  motives,  yet  fretted  primarily 
against  bonds  which  were  purely  political  in  character,  how- 


UNEMPLOYMENT  581 

ever  sanded  with  economic  irritants.  For  even  when  this 
revolution  had  accomplished  its  utmost  aims,  some  quarter- 
century  later,  political  liberty  was  all  that  had  been  attained. 
Even  to-day  economic  liberty  and  democracy  yet  lie  wholly  in 
the  future. 

But  not  until  political  liberty  had  been  attained  could  com- 
mercialism be  fully  free  to  grow,  and  not  until  it  had  grown 
apace  could  the  problem  of  unemployment  develop  into  an  issue 
competent  to  force  or  guide  a  revolution.  For  unemployment 
is  as  modern  a  disease  as  is  appendicitis  or  poliomyelitis.  It 
is  the  result  of  modern  commercialism;  and  the  latter  is  the 
fruit  of  modern  political  liberty,  coupled  with  modern  inven- 
tion. 

Thus  has  arisen  gradually  from  the  depths  of  history  what 
is  obviously,  to  anyone  who  investigates  impartially,  a  great 
wrong — the  invasion  of  a  basic  right,  the  right  to  exert  oneself 
in  one's  own  behalf.  So  far  as  conscious,  individual  factors  are 
concerned  in  the  coming  crisis  (where  they  must  always  play  a 
secondary  role)  this  wrong  is  destined  to  form  the  pivotal 
feature  about  which  dizzy  events  shall  whirl. 

Unemployment  and  the  Will. — The  widespread  idea  that 
idleness  is  always  voluntary,  or  is  at  least  due  to  a  lack  of 
enterprise  in  search  of  work,  need  not  detain  us  long  here.  The 
idea  is  too  superficial  as  to  the  facts  of  the  situation,  and  too 
impotent  in  its  explanation  thereof.  It  is  too  lazy  itself — a 
lazy  mind's  easy  way  of  shoving  off  onto  others  its  own  re- 
sponsibilities. 

That  there  are  always  some  among  the  idle  who  prefer  to  be 
so,  is  not  to  be  denied  for  a  moment.  But  the  fact  is  not  of 
the  slightest  help  toward  understanding  a  single  case  of  in- 
voluntary unemployment. 

The  social  science  which  can  find  no  explanation  of  laziness 
but  to  leave  it  as  disposed  of  by  calling  it  "original  sin/'  or 
individual  whim,  may  lay  no  claim  to  consideration  by  serious 
minds  as  real  science.  It  deserves  only  the  rich  irony  of  a 
Dean  Swift,  who  marveled  at  the  acumen  of  the  scientists  of 
his  day — shown,  when  confronted  with  some  freak  which  no  one 
else  could  understand,  by  their  identifying  it  immediately  as 
a  "lusus  naturae"  ! 

But  modern  science  has,  or  should  have,  no  use  for  any  such 
cheap  and  lazy  royal  roads  as  that — of  explaining  unemploy- 


582  MODERN   ECONOMIC   TENDENCIES 

ment  as  due  to  original  sin,  or  individual  whim,  or  perversity, 
or  as  a  freak  of  any  sort.  Science  demands  an  explanation  of 
everything  as  a  natural  phenomenon,  the  effect  of  an  adequate 
cause.  Unemployment,  however  difficult  a  problem,  must  be 
just  that,  or  else  it  lies  in  the  realms  of  the  supernatural. 

It  is  so  obviously  a  morbid  phenomenon  that  it  can  lead  only 
to  the  query:  Why  can  this  be  so  in  sporadic  cases?  For  a 
person  who  does  not  enjoy  work  is  plainly  just  as  abnormal  as 
one  who  does  not  enjoy  food  or  sleep. 

There  is  indeed  no  problem  in  all  social  science  which  requires 
such  careful  procedure  on  the  part  of  the  student  as  unemploy- 
ment. For  on  the  one  side  is  the  minority  of  the  unemployed 
which  does  not  wish  to  work.  On  the  other  is  the  majority — 
indubitable  to  everyone  in  touch  with  real  social  work — which 
does  wish  work  but  which  cannot  get  it. 

Every  investigator  knows  this  to  be  a  fact.  Its  existence  is 
proven,  if  by  no  other  fact,  by  that  surplus  of  labor  which 
presents  itself  in  response  to  every  advertisement  of  opportunity. 
For  the  ratio  of  number  of  applicants  to  those  wanted  is  always 
greater  than  unity,  varying  from  two  up  to  fifty  or  more. 

This  fact  cannot  be  dismissed  with  a  wave  of  the  hand.  It 
is  universal.  It  is  unnatural.  It  is  abnormal  that  men  should 
have  to  seek  opportunity  to  work ;  still  more  so  that  there  should 
be  difficulty  in  finding  it.  We  have  become  so  accustomed  to 
this  ugly  distortion  of  the  natural  social  relationships  that  we 
have  ceased  to  recognize  it  as  the  deformity  which  it  is.  We 
badly  need  to  realize  that  every  surplus  applicant  turned  away 
from  a  job  is  an  instance  of  forcible  unemployment. 

It  is  not  enough  to  say  that  these  surplus  applicants  are 
incompetent.  Why  are  they  incompetent?  Or  why,  if  they  are 
competent  only  for  lower  grades  of  work,  are  they  wandering 
aimlessly  in  search  of  work  beyond  their  caliber?  For  again, 
there  are  too  many  of  them,  everywhere,  to  be  dismissed  with  the 
words  "ignorant  whim"  or  "over-ambition." 

Or,  if  they  should  return  to  these  lower  grades  of  work,  will 
they  find  there  a  full  demand  for  their  efforts?  Everyone 
acquainted  with  the  facts  knows  that  they  will  not.  The  deficit 
in  employment  is  as  obvious  in  the  lowest  grades  of  labor  as  in 
the  highest.  The  percentage  of  unemployment  may  be  even 
higher  in  the  lowest  grades. 

Nor,  on  the  other  hand,  does  this  fact  explain  the  mystery, 


UNEMPLOYMENT  583 

by  extending  the  hope  that  society  wants  only  the  best  of  work 
done,  "and  that  "there  is  always  room  at  the  top."  In  general, 
the  deficit  in  employment  is  indifferent  to  level  of  ability.  It  is 
the  cultivated  classes,  often,  which  suffer  the  most  from  unem- 
ployment. 

Unemployment,  however,  is  markedly  dependent  upon  sort 
of  ability.  There  is  almost  always  a  demand  for  commercial, 
combative,  selfish  or  wasteful  ability.  It  is  the  opposite  from 
these  which  suffer. 

For  the  most  painful  deficit  in  demand  of  all  appears  in 
those  higher  grades  of  productive  ability  which  are  of  the  very 
greatest  value  to  the  community — or  which  would  be  so,  if 
once  released  into  activity  by  adequate  reward.  These  are  the 
creative  intellectuals — the  students,  writers,  teachers,  inventors, 
discoverers,  artists,  composers,  preachers,  etc. — those  who  have 
traditionally  lived  and  worked  in  poverty,  died  in  obscurity, 
and  then  been  exploited  for  decades  or  centuries  after  their 
deaths,  by  every  dead-beat  businessman  who  found  any  use 
whatever  for  their  ideas  in  the  furtherance  of  his  private  profit- 
making.  For  there  is  not  a  furnace  which  could  heat,  nor  a 
wheel  which  could  turn,  in  any  factory  in  the  land,  were  it 
not  for  knowledge  accumulated  in  the  past,  and  dedicated  freely 
to  mankind  by  these  people,  without  society's  having  even  re- 
paid them,  during  their  lifetime,  with  a  steady  job  at  scant 
wages. 

It  is  this  universal  deficit  in  demand  for  productive  ability — 
sufficiently  marked  in  the  lower  grades  of  ability  to  negative 
the  idea  that  labor  is  creating  this  deficit  by  its  own  too  great 
ambition,  and  enough  more  so  in  the  higher  levels  of  ability 
to  negative  the  opposite  idea,  that  labor  is  creating  it  by  too 
little  ambition — which  constitutes  the  gravest  problem  of  the 
day. 

Incompetence!  Where? — We  are  driven,  if  sincere,  to  in- 
quire whether  it  be  not  the  employer,  rather  than  the  work- 
man, who  is  incompetent,  in  that  he  cannot  administer  more 
responsibly  that  function  of  "employer"  which  he  has  assumed 
gratuitously,  quite  without  call  or  warrant  from  society  to 
do  so.  For  it  has  already  developed  that  the  wages  paid  are 
utterly  incompetent,  when  translated  into  purchasing-power,  to 
equal  the  value  produced.  Why  may  it  not  be  the  job  which 
is  incompetent,  rather  than  the  man? 


584  MODERN    ECONOMIC    TENDENCIES 

When  the  real  explanation  of  enforced  idleness — commercialism 
— has  come  to  be  understood,  it  will  be  plain  that  those  who 
do  not  wish  to  work  are  merely  those,  or  the  descendants  of 
those,  who  for  generations  have  found  life  presenting  to  them 
the  alternative  between  either  too  much  work  or  no  work  at 
all — and  always  insufficient  reward.  These  have  developed  into 
harmony  with  their  environment  just  as  naturally  as  any  other 
form  of  life.  They  embody  the  inevitable  result  of  generations 
of  irregular  employment,  overwork  alternating  with  complete 
idleness,  diluted  purchasing-power,  and  that  malnutrition  of 
body  and  soul  which  all  these  enforce,  namely,  sheer  laziness. 

Idleness,  by  forced  repetition,  will  become  as  instinctive  and 
uncontrollable  a  habit  as  well  as  any  other.  The  instinct  of 
industry,  as  well  as  a  muscle  or  a  gland,  may  be  atrophied  by 
disuse. 

It  is  certain,  at  any  rate,  that  those  who  do  not  desire  work 
are  not  to  be  found  among  the  surplus  applicants  for  adver- 
tised jobs.  Their  very  presence  in  the  miserable  queues  of 
seekers  after  work  proves  that. 

Rights  of  Man. — Thus  this  great  modern  wrong — the  fruit 
of  recent  expansion  of  invention,  and  of  commercialism 
parasitical  upon  invention — creates  a  need  for  a  new  statement 
of  the  Eights  of  Man.  This  new  declaration  must  include  his 
Right  to  Employment.  The  guarantee  of  an  economic  system 
which  will  automatically  grant  employment  to  each  citizen  who 
may  prefer  work  to  want,  is  one  of  the  heaviest  and  most 
elementary  responsibilities  now  resting  upon  modern  society. 

Nor  does  this  mean  any  childish  policy  of  forcing  unneeded 
public  works,  just  in  order  to  supply  jobs.  The  forcible  expan- 
sion of  public  works,  to  be  paid  for  from  taxes,  does  not  even 
scratch  the  surface  of  the  problem  of  unemployment.  It  does 
not  increase  by  one  penny  the  current  demand  for  labor.  His- 
tory has  proven  this  time  and  again. 

What  is  wanted  is  an  automatic  assurance  of  a  continuous 
demand  for  more  labor  than  presents  itself.  The  jobs  should 
always,  automatically,  be  in  excess  of  the  applicants,  just  as  at 
present  the  applicants  are  always,  automatically,  in  excess  of 
the  jobs.  Naturally  this  is  so.  All  we  need  to  do  is  to  remove 
the  artificial  distortions,  and  then  have  faith  in  God,  nature 
and  man. 

As  an  ethical  preliminary  to  this  properly  automatic  economic 


UNEMPLOYMENT  585 

system,  the  present  employers  of  labor  should  be  held  in  the 
same  glare  of  public  responsibility  with  our  judges  upon  the 
bench.  They  should  never  be  allowed  to  evade  their  responsi- 
bility for  the  current  demand  for  labor  in  the  guise  of  private 
citizens.  They  are  our  most  important  public  officers,  holding 
the  stability  of  our  entire  social  structure  in  their  laps;  for 
the  first  fruit  of  enforced  idleness,  or  irregular  employment, 
is  bitter  discontent. 

Individually,  of  course,  each  employer  is  now  helpless  to 
remedy  unemployment.  Each  can  hire  only  those  whose  labor 
his  market  demands.  But  as  a  class — properly,  as  a  profession 
— they  should  be  held  strictly  accountable  for  a  frank,  public 
admission  of  the  universal  fact  of  a  continual  deficit  in  em- 
ployment, and  for  denouncing  its  cause — commercialism.  This 
remains  so  even  if  it  does  demand  the  best  intellect  in  the  land 
to  explain  the  details  of  that  cause,  and  the  entire  power  of 
the  state  to  remove  it. 

For  there  is  no  form  of  oppression  in  human  life  so  de- 
moralizing and  degrading,  so  productive  of  crime  and  suicide, 
so  sure  to  react  upon  the  welfare  of  society  with  its  unreasoning 
bitterness  in  a  thousand  different  ways,  as  enforced  idleness. 
Enforced  over-work,  as  in  slavery,  is  far  preferable.  On  the 
other  hand,  there  is  no  feature  of  social  metabolism  which 
leads  so  directly  to  the  elevation  of  national  ideals  and  popular 
accomplishment  as  the  certainty,  amongst  all  classes  of  popula- 
tion, of  continuous,  justly  paid  work. 

America  has  grown  to  what  it  is  upon  these  facts.  Its  best 
traditions  of  the  past  are  founded  upon  the  latter;  its  worst 
problems  of  the  present  day  upon  the  former. 

Our  poor  now  need  greater  certainty  of  opportunity  for  work, 
at  reasonable  hours  and  pay.  Our  rich  need  a  greater  necessity 
for  work.  The  two  huge  ethical  or  psychological  problems  of 
the  day  are  the  bitter  vindictiveness  of  the  lower  classes  and 
the  equally  unpatriotic  superciliousness  of  the  upper  classes. 
Both  of  these  are  the  inevitable  products  of  the  current  deficit 
in  employment. 

It  therefore  becomes  of  prime  importance  to  inquire  with 
scientific  care  and  impartiality  just  how  far  the  individual, 
and  how  far  the  lack  of  organization  of  our  economic  society, 
may  be  responsible,  and  in  what  direction,  for  that  enforced 
idleness  which,  in  larger  role  than  its  infantile  offspring — 


586  MODERN   ECONOMIC   TENDENCIES 

voluntary  idleness — is  now  rapidly  becoming  a  menace  to  our 
social  stability,  at  both  apex  and  foundation  of  modern 
civilization. 

Efficiency  in  Social  Hiring-power. — Let  us  imagine  an 
entire  community  organized  as  an  actual,  modern  factory,  and 
producing  (along  with  the  usual  technical  output  of  machinery, 
textile  goods,  or  the  like)  everything  needed  by  the  workmen- 
citizens  to  support  life.  Let  it  also  be  supposed  that  these 
Workmen-Consumers  purchase  from  this,  their  own  factory,  all 
which  they  consume  in  life-support,  and  that  they  absorb  the 
entire  output  of  the  factory  in  this  way. 

Let  us  imagine  this  factory  as  charging  the  Consumers — after 
making  good  its  depreciation  of  plant,  insuring  life  and 
property,  providing  a  margin  of  tangible  stock  for  the  expan- 
sion of  its  facilities,  and  a  suitable  sinking-fund  of  credit  to 
insure  fluidity — only  cost  for  the  goods.  This  is  the  Natural 
Price.  This  it  does  through  that  same  statistical  Central  Office 
which  now  oversees  all  interchange  between  department  and 
department,  or  workman  and  workman,  in  every  factory  to-day. 
There  is  no  profit  abstracted  and  divided,  no  commercial  com- 
petition (although  endlessly  free  and  fully  rewarded  emulation), 
nor  any  dividends  distributed,  nor  rent  nor  interest  paid  to 
outside  owners. 

All  that  is  easily  attainable  upon  a  national  scale  to-day,  in 
our  own  economic  community,  under  the  direction  of  those  who 
now  conduct  our  present  factories,  if  we  can  but  persuade  them 
to  expand  the  existing  factory-system  to  include  all  active 
people,  with  the  simultaneous  prohibition  of  all  ownership-in- 
industry.  Such,  so  far  as  light  yet  penetrates,  would  be  the 
complete  and  perfect  economic  system,  operating  at  an  efficiency 
of  organization  of  one  hundred  per  cent. 

Imagine,  however,  instead  of  any  fantastic  substitute  for  our 
existing  currency,  that  these  men  and  women  are  all  paid 
their  wages  in  money,  as  now,  and  that  they  buy  their  goods  for 
cash.  Or  one  department  of  the  factory  may  be  a  savings-bank, 
backed  by  the  wealth  of  the  entire  factory-community,  upon 
the  books  of  which  wages  are  entered  as  credits  and  purchases 
charged  as  debits.  This  or  cash  would  be  a  matter  of  con- 
venience. 

Again,  the  control  of  the  factory  is  vested,  not  in  its  mem- 
bers when  acting  as  producers,  but  in  those  same  persons  when 


UNEMPLOYMENT  587 

functioning  as  Ultimate  Consumers.    The  vital  contrast  between 
these  two  arrangements  will  be  explained  later. 

The  100-per-cent  Community. — Such  a  factory-system  com- 
munity would  then  comprise  all  of  what  our  present  commer- 
cial system  is  supposed  to  be,  but  is  not — namely,  one  designed 
for  the  good  of  the  community.  For  all  its  parts  would  then 
be  organized  primarily  with  a  view  to : 

(1)  The  interchange  of  goods,  during  the  many  processes  of 
their  manufacture,  with  the  maximum  of  ease  and  directness, 
through  community-credits  in  the  form  of  factory-requisitions. 

(2)  For  the  unlimited  extension  of  credit   to  individuals, 
but  solely  in  the  form  of  appliances  granted  to  him  for  use 
for  society's  good;  and  this  credit  would  be  based  upon  the 
general  wealth  of  the  land,  and  upon  the  user's  productive 
ability,  rather  than  upon  some  hoard  of  all  but  useless  gold, 
or  upon  the  individual's  ability  to  extort  profits  from  his  fel- 
lowmen,  as  now. 

(3)  For  the  sale  of  finished  goods  to  their  Ultimate  Con- 
sumer at  their  natural  price — factory-cost. 

(4)  For  the  hiring  of  all  labor  offering  itself. 

For  there  is  no  limit  to  human  demand  for  productive  labor. 
The  only  limitation  now  is  in  purchasing-power.  But  then 
purchasing-power  would  always  be  equal  to  productivity,  be- 
cause no  artificial  deficit  would  then  be  created,  during  the 
transformation  of  one  into  the  other,  by  the  dissipation  of 
energy  in  commercial  antagonisms  and  duplications.  Therefore 
the  simple  fact  that  every  new  pair  of  hands,  in  seeking  labor, 
brings  with  it  a  back  to  be  clothed  would  then  reign  in  un- 
dimmed  supremacy. 

The  vital  distinction  between  the  employer  of  that  day  and 
the  present  one  is  that  he  would  then  be  purely  and  openly 
what  he  is  now  in  a  concealed,  disguised,  ashamed-to-own-up- 
to-it  way — the  salaried  agent  of  the  Ultimate  Consumer.  Then 
he  would  pass  on  to  the  producers  every  cent  of  demand  ex- 
pressed by  the  Ultimate  Consumer,  whereas  now  he  passes  on 
but  a  small  and  decreasing  fraction  thereof.  For  then  his  own 
emolument  would  constitute  no  deficit  in  this  purchasing- 
power,  as  is  usually  the  case  now,  because  then  his  own  efforts 
would  be  productive,  instead  of  combative,  as  now. 

The  vital  distinction  between  the  factory-requisition  credit- 
instruments  of  this  100-per-cent  community  and  those  upon 


588  MODERN   ECONOMIC   TENDENCIES 

which  we  now  rely  for  our  extensions  of  facilities  and  our 
current  financing  of  the  employment  of  labor — commercial 
securities — is  that,  whereas  our  present  ones  are  accepted  as  a 
circulating-medium  only  to  a  valuation  proportional  with  their 
exaction  of  dividends  from  the  community — their  value  as  social 
life-blood  being  quite  ignored  in  case  of  a  lack  of  extorting- 
power — these  factory-credits  bear  no  interest  at  all,  but  perform 
their  proper  function,  interchange,  perfectly  nevertheless.  Their 
valuation  is  based  solely  upon  their  valuable  fluidity. 

This  is  just  the  way  in  which  we  use  cash  in  our  everyday 
transactions.  It  bears  no  interest.  We  do  not  care  a  hang 
about  the  gold  stored  away  in  somebody's  vault,  upon  which 
the  value  of  the  cash  is  supposed  to  depend.  We  value  the 
cash  only  because  it  will  buy  things. 

That  the  gold  is  a  necessary  measure  of  this  ability  to  buy 
things  we  have  freely  admitted.  But  that  it  is  a  crass  failure 
in  completely  performing  this  function  is  proven  by  the  monthly 
decrease  in  the  ability  of  cash  to  buy  things,  while  its  gold- 
basis  remains  unshaken. 

The  Natural  Economic  Society. — Under  such  a  system  as  we 
have  imagined,  the  exchange  of  effort  for  money  by  the  laborer, 
or  of  money  for  commodities  by  the  Ultimate  Consumer,  must 
then  always  bring  to  the  individual  the  true  economic  equivalent 
of  his  actual  productive  effort  and  ability,  at  100  per  cent 
efficiency  of  organization  and  exchange;  because  everyone  in 
the  factory-community  is  occupied  with  helpful,  productive 
tasks,  with  no  energy  wasted  in  bargaining,  etc.  In  such  a 
community  each  dollar  expended  across  the  shop-counter  would 
then  buy  a  true  dollar's  worth  of  life-support. 

Conversely,  each  worker  would  then  find  demand  for  at 
least  100  per  cent  of  his  true  productive  ability.  The  words 
"at  least"  refer  to  the  fact  that  the  natural  condition  of  biologic 
growth,  if  not  interfered  with  by  artificial  obstacles,  is  one  of 
a  continual  expansion  of  demand  beyond  the  existing  ability 
to  fulfill  it.  The  contrasted  economic  condition  which  is  now 
all  but  universal  with  us,  of  a  deficit  in  demand  below  the 
ability  to  perform,  is,  to  well  informed  minds,  a  monstrosity 
so  great  as  to  diagnose  immediately  a  deep  pathological  con- 
dition of  society. 

Dependents  and  Independents. — In  such  a  community  the 
individuals  who  happened  to  possess  less  than  the  average  pro- 


UNEMPLOYMENT  589 

ductive  powers,  even  including  the  idiots  and  imbeciles,  would 
then  form  no  burden  upon  the  community,  because  society 
would  find  in  the  idiots  themselves  a  demand  for  their  simple 
abilities,  and  a  supply  for  their  simple  demands.  Their  in- 
come, modest  though  it  might  be,  would  be  exactly  commensurate 
with  their  simple  wants,  and  it  would  be  certain. 

This  would  be  so  merely  because  society  would  then  provide 
means  for  their  interchange  with  the  rest  of  the  world  at  an 
efficiency  of  100  per  cent.  We  now  perform  this  interchange, 
in  our  actual  civilization,  at  an  efficiency  averaging  some  19 
per  cent — when  including  in  the  average  with  the  idiots  all 
the  ablest  folk  in  the  land. 

As  for  those  who  happened  to  possess  greater  capabilities 
than  the  average,  they  would  then  automatically  enrich  the  com- 
munity in  equivalence  with  their  larger  abstraction  and  con- 
sumption of  goods.  They  would  then  no  longer  be,  as  now,  a 
burden  upon  society  far  more  puzzling  and  threatening  than 
are  all  its  idiots,  imbeciles  and  insane  together. 

Insane  Economics. — Let  us  now  imagine  that  the  salaried 
superintendent  of  our  100-per-cent  factory-system  community — 
its  highest  controlling  authority — should  suddenly  become  in- 
sane over  a  supposed  improvement  in  the  way  of  conducting 
the  work,  and  that  his  community  did  not  immediately  per- 
ceive his  mistake,  but  followed  him  faithfully  in  his  fad.  Let 
it  be  supposed  that  he  detailed  one-fifth  of  his  total  working- 
force  of  brains  and  brawn  to  build  a  high,  gateless  wall  about 
the  factory-premises,  with  similar  walls  between  each  two  de- 
partments or  shops. 

Everything  then  entering  or  leaving  the  factory,  or  needing 
transit  from  one  department  to  another,  must  be  lifted  over 
these  walls.  This  task  is  also  a  part  of  the  duties  of  the  one- 
fifth,  and  for  their  aid  is  detailed  one-fifth  of  all  the  cranes, 
trucks,  power-supply  and  other  appliances  of  the  factory. 

We  ourselves  know,  without  need  for  debate  or  proof,  that 
this  policy  was  really  that  of  an  insane  man,  and  that  by  it 
the  productive  efficiency  of  the  factory  could  by  no  possibility 
be  enhanced,  but  must  be  reduced  at  least  one-fifth.  For  at 
least  one-fifth  of  the  factory's  energy  is  dissipated  at  the  walls. 
But  this  figure  makes  no  allowance  for  the  manifold  delay  and 
discouragement  of  those  who  remain  at  bench  or  machine,  due 
to  the  walls,  but  takes  cognizance  merely  of  the  diversion  of 


590  MODERN   ECONOMIC   TENDENCIES 

labor  from  production  to  wall-building  and  hoisting.  Yet,  in 
our  imaginary  factory,  we  must  suppose  implicit  faith  on  the 
part  of  the  entire  community  that  this  over-the-top  method  was 
the  only  wise  way  of  conducting  interchange. 

Purchasing-power  and  Hiring-power. — It  is  now  impor- 
tant to  investigate  the  effect  of  this  strange,  imaginary  faith 
and  policy  upon  two  -important  things,  namely :  ( 1 )  The  pur- 
chasing-power of  the  dollar,  and  (2)  the  demand  for  pro- 
ductive labor. 

The  aggregate  money  handled  by  the  community  has  not  been 
affected  by  the  new  policy.  There  would  now  be  just  as  many 
dollars  on  hand,  but  each  gold  dollar  would  now  require  one- 
fifth  more  exertion  to  extract  it  from  the  soil.  Hence  prices 
will  all  have  remained  unchanged. 

But  the  difficulty  in  acquiring  purchasing-power  has  increased. 
The  gold  dollar,  while  still  a  hundred-cent  dollar  in  terms  of 
exertion  required  to  secure  it,  has  now  become  an  eighty-cent 
dollar  in  terms  of  the  life-support  which  it  can  command. 

Again,  the  purchasing-power  being  now  reduced  by  twenty 
per  cent,  the  demand  for  produce  would  be  reduced  by  like 
fraction.  Yet,  since  the  factory  is  now  working  at  only  four- 
fifths  efficiency,  this  demand  would  still  be  for  its  full  possi- 
bilities. All  would  still  be  employed. 

Further,  since  it  has  been  assumed  that  the  workers  at  the 
wall  received  the  same  rates  of  wage  as  those  of  equal  ability 
elsewhere  in  the  shop,  all  would  feel  an  equal  demand  for  their 
labor.  Only,  consciously  or  unconsciously,  the  community  would 
be  suffering  from  a  twenty-per-cent  deficit  in  sustenance.  Al- 
though it  could  not  understand  what  was  the  matter  with 
itself,  yet  the  fact  would  be  that  it  was  not  fully  nourished, 
as  before,  into  equilibrium  with  its  natural  productivity.  It 
would  not  possess  the  same  margin  of  vitality  for  meeting 
emergencies,  nor  for  progress  in  civilization,  nor  for  the  main- 
tenance of  moral  or  ethical  poise.  Its  members,  while  ignorant 
of  what  was  wrong  with  them,  would  be  found  somewhat  prone 
to  disease,  to  discontent,  to  pessimism  and  to  various  destructive 
philosophies,  in  place  of  that  universal  cheery,  healthy  content 
with  life  which  prevailed  in  the  factory-community  before  the 
new  policy  was  installed. 

Class-Dominance. — But  it  is  inevitable  that  this  assumed 
equality  between  the  several  classes  of  workers  could  not  pre- 


UNEMPLOYMENT  591 

vail  in  actual  life.  Disparity  between  the  wall-workmen  and 
others  must  develop.  For  it  would  soon  become  plain  to  all 
that  no  work  could  be  done  inside  the  factory,  nor  any  of  its 
produce  consumed  outside,  without  the  activities  of  those  at 
the  walls. 

This  being  so,  abilities  peculiarly  adapted  to  hoisting  would 
inevitably  command  a  premium.  Wages  for  hoisting,  in  view 
of  the  artificial  estimate  placed  upon  this  sort  of  work,  would 
become  higher,  for  the  same  rank  in  individual  ability,  than 
for  productive  work  inside  the  factory. 

The  explanation,  we  now  can  see,  would  not  lie  in  the  supe- 
rior general  ability  of  the  individual  hoister,  but  in  his  pos- 
session of  ability  in  a  peculiar  line,  which  was  not,  in  reality, 
useful  at  all,  but  rather  destructive.  The  thing  which  imparts 
this  higher  valuation  to  the  man  is  a  sheer  public  delusion.  Yet 
it  is  just  as  effective,  for  all  that. 

Thus  it  would  be  said  among  these  imaginary  people  that 
so-and-so  was  a  man  of  very  great  productive  ability,  and  de- 
serving of  a  very  large  income,  because  he  could  hoist;  whereas 
the  fact  was  that  so-and-so  possessed  no  useful  ability  at  all — 
or  at  least,  produced  no  useful  result — his  "ability"  consisting 
primarily  in  unusual  shrewdness  at  selecting  a  line  of  effort 
upon  which,  whether  productive  or  destructive,  his  fellowmen 
believed  themselves  to  be  peculiarly  and  acutely  dependent. 
Yet  this  abject  dependence  of  the  entire  community  upon  so- 
and-so's  ability  as  a  hoister  rested  upon  nothing  more  sub- 
stantial than  a  widespread  delusion! 

Thus  the  hoisters  would  soon  learn  that,  whereas  no  other 
workman  nor  trade  inside  the  factory  possessed  any  advantage 
over  any  other — greater  skill,  greater  need  and  greater  wage 
being  always  automatically  balanced — yet  that  they  themselves 
did  possess  such  an  advantage.  For  no  man  inside  might  work, 
nor  any  man  outside  might  eat,  except  as  they  worked.  Indeed, 
they  would  merely  have  to  sit  and  idle,  and  the  rest  would 
clamor  for  the  resumption  of  their  work,  and  would  offer  for 
such  resumption  prizes  quite  in  addition  to  the  standard  wage. 

"Better  a  half -loaf  than  no  bread"  would  inevitably  become 
the  motto  of  the  insiders.  "Charge  all  the  traffic  will  bear" 
would  as  quickly  be  adopted  by  the  hoisters.  Their  policy  would 
soon  adjust  itself  into  a  crafty  medium — enjoying  part  idle- 
ness on  the  extra  prizes  wrung  from  the  hardships  of  the  inside 


592  MODERN    ECONOMIC   TENDENCIES 

party,  while  neither  permitting  the  latter  its  natural  activity 
without  restraint  (else  it  would  grant  no  prizes),  nor  yet  so 
throttling  it  that  it  had  no  extra  strength  with  which  to  supply 
prizes. 

Thus  the  wall-hoisters  must  soon  develop  into  a  special  class, 
regarded  with  a  sort  of  veneration  (except  by  the  minority 
which  sees  through  their  fraud),  accorded  special  privileges  and 
given  unusual  rates  of  pay. 

Then,  further,  not  only  must  the  hoisting  itself  be  done  in 
full  volume,  in  order  to  permit  current  production,  but  the 
walls  themselves  must  also  be  extended,  raised,  multiplied  and 
repaired.  Instead  of  anyone's  seeing  that  the  first  proper  task 
was  to  tear  them  all  down,  popular  superstition,  guided  by  the 
gravest  heads  in  the  land  (and  fostered  by  the  wall-builders 
as  sedulously  as  superstition  has  always  been  fostered  by  the 
priesthood  parasitical  upon  it),  would  hold  that  their  con- 
tinual exaggeration  was  a  sacred  duty  in  the  interests  of 
industry. 

For  do  not  the  walls  "earn"  big  incomes?  And  is  this  not 
so  because  no  one  could  labor  or  eat  if  activity  at  the  walls 
should  cease? 

Guilds  and  Aristocracies. — Thus  must  arise  inevitably  a 
whole  aristocratic  trade  or  "Guild  of  Wall-workers."  Further, 
since  pecuniary  profits  always  lead  to  honor,  there  must  also 
arise,  through  the  aging  of  the  active  wall-workers  and  their 
natural  desire  to  retire  into  luxurious  leisure,  an  honorary 
caste  of  "Custodians  of  the  Wall,"  from  whom  no  effort  is 
required,  but  to  whom  liberal  income  is  allotted  as  a  feudal 
right.  Thence  it  is  but  a  step,  as  the  generations  pass,  to 
permit  the  first-born  to  inherit,  unearned,  this  special  privilege 
of  income  in  idleness. 

In  such  a  situation  as  that,  as  everywhere,  the  ethical 
standards  of  the  community  must  be  in  accord  with  its  economic 
beliefs.  Public  opinion  cannot  be  imagined  as  recognizing  the 
hollow  fraud.  From  our  modern  point  of  view,  only  the  most 
medieval  stupidity  and  superstition  could  blind  the  factory- 
community  to  the  truth.  But  we  have  assumed  in  our  imagin- 
ary community  a  grade  of  intelligence  unable  to  recognize  the 
obvious. 

Delusion  Begets  Delusion. — So  the  wall-workers,  finding 
that,  as  a  matter  of  fact,  productive  labor  proceeds  or  stops  as 


UNEMPLOYMENT  593 

their  acts  permit,  must  soon  gravitate  into  the  mental  attitude 
of  holding  that  they  actually  grant,  or  even  create,  the  oppor- 
tunity for  employment  on  the  part  of  the  producers;  and  in 
this  our  imaginary  public  opinion — instead  of  realizing,  as  we 
do,  that  they  only  hindered  employment — would  follow  them 
without  question.  It  could  not  realize,  as  we  do,  that  it  was 
only  the  productive  members  of  the  community  who  were 
creating  opportunity  for  interchange,  consumption  and  pur- 
chase, and  hence  for  employment. 

The  Sovereignty  of  Interchange  or  Purchase  for  Con- 
sumption.— But  it  is  plain  that,  even  in  an  ideal  community 
it  is  not  even  the  producers  who  create  employment  for  others 
by  their  productive  acts  alone.  Such  acts  might  feed  the  actors 
themselves,  although  only  meagerly  in  comparison  with  modern 
standards.  But  in  a  modern  society,  with  its  complex  tools  and 
enforced  specialization,  it  is  only  an  equitable  interchange  of 
equivalent  values,  promoted  solely  by  desire  for  consumption, 
which  affords  employment  and  forms  the  true  cement  of  social, 
economic  solidarity. 

Such  an  interchange  of  equivalents  occurs,  as  to  employ- 
ment, only  when  the  producers  of  actual  value  appear  in  the 
market  as  Consumers.  It  is  only  the  Ultimate  Consumers  who 
hire. 

But  it  is  only  when  the  Ultimate  Consumer  is  also  a  pro- 
ducer that  he  pays  his  bills — in  purchasing-power,  at  least. 
For  the  Consumer  who  pays  his  bills  in  money  which  his  own 
acts  (or  idleness)  have  served  to  dilute  in  purchasing-power, 
is  just  as  surely  a  dead-beat  as  the  Consumer  who  doesn't 
pretend  to  pay  his  bills  with  any  money  at  all.  Both  of  them 
are  just  as  much  swindlers,  in  effect,  as  he  who  pays  his  bills 
with  counterfeit  money. 

It  is  only  as  a  producer  becomes  a  spender,  or  an  Ultimate 
Consumer,  in  the  open  market — or  as  a  spender  has  previously 
been  a  producer  of  true  life-support  for  others — that  demand 
for  employment  arises.  All  employment  is  created  only  by 
production  followed  by  purchase.  All  deficit  in  employment 
is  created  by  non-production,  whether  active  or  idle,  followed  by 
an  artificially  granted  purchasing-power.  The  truth  of  this  will 
appear  gradually,  as  the  analysis  proceeds. 

But  to  the  inhabitants  of  our  imaginary  factory  this  silly 
fiction  as  to  the  creation  of  employment,  and  the  "giving"  of 


594  MODERN  ECONOMIC  TENDENCIES 

jobs,  by  a  portion  of  the  community  which  creates  nothing, 
would  appear  as  solemn  and  sacred  truth.  Once  grant  their 
basic  veneration  of  the  tragic  fraud  involved  in  the  accepted 
presence  of  the  walls,  and  almost  any  silly  vagary  becomes  a 
natural  consequence. 

For  the  truth  is  that  it  is  the  people's  unemployment,  rather 
than  their  jobs,  which  they  owe  to  the  wall-people.  Assuming, 
for  the  moment,  that  disparity  of  income  between  the  pro- 
ducers and  the  wall-workers,  as  classes,  has  not  yet  arisen,  the 
real  demand  for  the  services  of  each  person,  expressed  in  pur- 
chasing-power, amounts,  on  the  average,  to  only  four-fifths  of 
his  normal  productive  power — however  unconscious  of  the  fact 
he  may  be.  That  is  to  say,  the  real,  physical  demand  for  the 
best  work  of  any  citizen-worker  is  always  incomplete,  by  the 
proportion  of  total  energy  wasted  upon  walls.  But  of  this  fact 
he  has  only  indirect  evidence,  which  he  fails  to  understand. 

Real  and  Imaginary  Demand. — This  sort  of  deficit  is  due 
to  the  fact  that  there  is  no  physical,  natural  demand  for  the 
work  of  the  wall-people.  The  demand  for  the  wall-work  is 
merely  a  hollow  pecuniary  demand,  based  upon  delusion  rather 
than  fact.  It  is  only  the  services  of  the  producers  which  is 
in  real,  physical  demand,  because  this  alone  supports  life.  Yet 
this  sort  of  effort  enjoys  only  four-fifths  of  the  total  pecuniary 
demand.  Hence  the  universal  deficit,  in  both  employment  and 
subsistence,  of  twenty  per  cent. 

Yet,  under  the  momentary  assumption  of  equal  importance 
attached  to  productive  and  wall-work  respectively,  the  line  be- 
tween the  two  sorts  of  demand  has  been  erased,  for  the  pur- 
poses of  the  argument,  and  the  twenty  per  cent  deficit  in  real 
demand  has  been  spread  evenly  over  the  entire  community, 
disguising  the  eighty  per  cent  of  real  remainder  as  apparently 
a  full  demand  for  each  person.  Such  is  the  disguising  effect 
of  a  fluid  circulating-medium  in  an  intricate  society.  But, 
because  all  are  in  the  same  boat,  the  deficit  is  felt  only  sub- 
consciously. 

The  point  to  be  driven  home  here,  before  we  proceed  a  step 
farther,  is  that,  even  under  the  assumption  of  equal  distribu- 
tion, the  real  unemployment  due  to  the  wastefulness  of  the 
walls  already  exists  throughout  the  community,  in  the  form  of 
a  fractional  unemployment  for  each  individual;  but  it  is  sub- 
conscious because  equally  distributed,  and  therefore  is  accepted 


UNEMPLOYMENT  595 

as  natural.  It  is  fractional  for  each  person  only  because  it  is 
equally  distributed. 

It  requires  the  additional  factor  of  disparity  in  rates  of 
income  to  make  the  community  conscious  of  its  deficit  below 
full  employment,  by  its  creation  of  a  corresponding  disparity 
in  unemployment,  with  its  consequent  concentration  upon  one 
individual  or  another  to  a  degree  contrasted  with  his  neighbors. 

The  Inevitable  Result  of  having  Walls. — For  just  as  soon 
as  public  superstition  might  accord  to  wall-work  an  importance 
superior  to  production — which  must  be  inevitable  as  soon  as 
the  wall-workers  perceive  that  production  can  proceed  only 
with  their  permission — then  this  deficit  in  employment  will 
no  longer  be  evenly  distributed,  no  longer  always  a  minor 
fraction  of  the  individual's  productivity,  and  no  longer  disguised 
into  subconsciousness. 

For  now  the  wall-workers,  on  the  one  hand,  find  the  demand 
for  their  services  exaggerated  not  only  from  eighty  to  one 
hundred  per  cent  of  full  capability,  but  far  beyond.  Some  find 
that  their  existence  is  in  high  demand,  commanding  a  generous 
income,  without  regard  to  whether  they  do  any  work  at  all 
or  not. 

But  even  if  the  wall-workers  have  to  work  very  hard,  and 
even  if  the  demand  for  their  work  is  merely  one  hundred 
per  cent,  this  fact  immediately  confronts  the  partially  em- 
ployed producers  with  a  contrast  which  they  did  not  before 
perceive.  They  become  conscious  of  a  disparity  in  opportunity. 
Whereas  the  wall-worker  enjoys  a  hundred-per-cent  demand  for 
his  labor,  the  producer  enjoys  only  an  eighty-per-cent  demand, 
or  less. 

On  the  other  hand,  the  producer-class  has  now  had  shifted 
back  upon  its  shoulders,  on  top  of  its  originally  equal  share 
in  the  deficit  in  employment,  due  to  the  diversion  of  effort 
from  production  to  walls,  this  additional  burden  of  deficit  in 
employment  which  properly  belonged,  at  least  in  due  propor- 
tion, to  the  wall-workers.  This  creates  amidst  the  producer- 
class  a  total  deficit  in  employment,  below  its  natural  pro- 
ductivity, of  considerably  more  than  the  original  twenty  per 
cent.  This  intensifies  the  sense  of  disparity  and  injustice,  and 
enlarges  the  chance  of  occasional  total  idleness. 

Exertion  no  Sign  of  Economic  Worth. — All  this  is  equally 
true  whether  the  moneys  diverted  from  producers  to  wall- 


596  MODERN    ECONOMIC   TENDENCIES 

workers  be  paid  for  active  hoisting,  or  as  an  honorarium  for 
caste-idleness.  The  wall-man  may  be  either  an  able,  energetic 
fellow,  building  walls  and  hoisting  things  over  them  most 
conscientiously  and  efficiently,  or  he  may  be  an  idle  nincompoop 
— it  makes  no  difference.  If  society  diverts  into  his  pockets 
(as  an  average  for  nis  class)  an  income  equivalent  to  the  pro- 
duce of,  say,  ten  average  producers,  which  he  wastes  either  in 
active,  conscientious  wall-work,  or  in  idling  upon  the  walls,  or 
in  absenteeism,  then  this  act  has  inevitably  produced  the  same 
deficit  in  the  purchasing-power  of  the  dollar,  in  the  aggregate 
hiring-power  of  the  Ultimate  Consumers,  and  thus  in  the 
aggregate  volume  of  employment,  as  if  the  ten  producers,  plus 
the  wall-man  himself,  had  all  been  idle. 

Thus  the  evil  visible  in  unemployment  arises  originally  in 
the  wastefulness  of  the  wall-work — and  idleness  is  no  more 
wasteful  than  is  misdirected  effort.  But  its  fruits  far  outspan 
its  roots.  It  is  merely  the  subconscious  deficit  in  ideally  full 
employment  which  equals  the  wasted  time  and  effort.  The 
bitterness  of  conscious  unemployment  spreads  far  beyond,  and 
is  due  solely  to  the  disparity  in  distribution  of  this  deficit  by 
the  artificial  and  insane  pre-eminence  attached  to  wall-work. 

Disparity  between  Individuals. — Then  the  debate,  so  far, 
has  compared  only  classes,  as  if  the  income  and  employment 
available  for  each  class  were  distributed  equally  among  its  in- 
dividual members.  But  now  must  be  considered  the  effect  of 
natural  differences  between  individuals. 

This  becomes  important  because  of  the  existence,  in  actual 
society  of  the  competitive  wage-system,  operative  in  the  face 
of  a  deficit  below  the  natural  aggregate  volume  of  employment. 
It  is  the  combination  of  these  two  factors,  and  not  the  first 
alone,  which  explains  virtually  all  visible  unemployment,  all 
social  discontent  and  much  individual  moral  lesion — peculation, 
graft,  gambling  and  prostitution. 

An  Aside  to  the  Socialists. — Socialistic  philosophies  place 
upon  the  former  factor  alone  the  whole  blame  for  these  evils, 
which  are  really  due  to  the  combination,  and  therefore  asks 
the  abolition  of  the  competitive-wage-system.  But  more  careful 
thought  will  show  that  the  evil  result  is  due  entirely  to  the 
unnecessary  presence  of  the  second  element.  That  once  abol- 
ished, by  the  elimination  of  all  unproductive  effort — and  that, 
in  turn,  accomplished  by  the  prohibition  of  all  ownership-in- 


UNEMPLOYMENT  597 

industry — and  the  competitive-wage-system  can  bring  no  harm 
to  anyone.  It  will  endure  permanently,  long  after  evolution 
or  revolution  has  swept  the  commercial  system  into  past  history. 

The  Explanation  of  Over- Work. — To  return  to  our  il- 
lustrative community,  because  of  the  uneven  distribution  of 
this  artificial  deficit  in  the  aggregate  demand  for  labor,  making 
apparent  the  menace  of  unemployment  and  offering  a  delusive 
promise  of  escape  through  unusual  industry,  alt  will  overexert, 
in  order  to  avoid  the  fate  of  enforced  total  idleness.  Labor, 
however  organized  into  trades-unions  for  defense,  must  com- 
pete with  itself  in  the  atmosphere  of  a  panic.  Its  ethics  must 
inevitably  degrade  into  the  brutality  and  frantic  over-exertion 
of  a  mob  fleeing  from  a  burning  building. 

Organization  may  allay  the  panic  in  spots,  but  it  cannot  put 
out  the  fire  and  abolish  all  casualties.  Some  few  are  sure  to 
be  caught.  For  everywhere  the  menace  of  unemployment 
threatens  one. 

Nor  can  the  simile  be  true  to  life  until  it  is  understood  that 
there  is  no  other  way  for  the  organized  minority  to  save  its 
few,  except  by  trampling  down  those  outside  its  selfish  ranks; 
for  such  is  the  case  in  economics.  Trades-unionism  unques- 
tionably pays,  for  those  inside,  ~but  only  at  the  expense  of  those 
outside,  who  pay  all  the  higher  wages,  and  lose  all  the  jobs, 
won  by  trades-unionism. 

Hence,  if  all  came  in,  trades-unionism  would  become  futile. 
There  would  be  none  outside  for  it  to  exploit — except  the 
capitalist-employer  class,  and  that  class  has  always  fattened 
upon  trades-unionism  and  high  wages.  Its  wealth  has  grown 
immeasurably  since  unionism  came  into  fashion.  Its  riches  are 
plainly  not  available  as  a  source  of  betterment  for  the  wage- 
earners.  Unionism  exploits  only  wage-earners. 

Even  if  all  workers  should  become  union-members,  that  can- 
not affect  the  source  nor  the  fact  of  the  deficit  in  employment. 
It  would  still  be  there,  only  then  all  of  the  laboring  class  must 
suffer  from  it  alike.  The  comforting  delusion  of  trades-unionism 
would  then  be  gone  forever,  leaving  man  face  to  face  with  the 
grim  fact  that  famine,  poverty  and  unemployment  are  created 
by,  and  not  removed  nor  remedied  by,  commercialism  and  trades- 
unionism  together — the  latter  being  merely  one  department  of 
the  former. 


598  MODERN   ECONOMIC   TENDENCIES 

Concentration  of  the  Deficit  in  Employment.— Thus,  in 

our  imaginary  wall-building  factory-community,  such  an  un- 
derlying, ever-present  deficit  in  employment  must  soon  result 
in  the  concentration  of  the  entire  burden  of  the  visible,  con- 
scious unemployment,  which  really  originated  with  the  wall- 
people,  first  upon  the  producers  as  a  class — although  that  is  the 
one  class  which  is  innocent — and  finally  upon  a  few  individuals 
thereof.  While,  as  in  the  case  of  the  fire,  all  will  suffer  from 
the  panic,  yet  only  a  few  will  be  visibly  burned. 

Whereas  in  its  origin  the  deficit  was  equally  distributed, 
and  therefore  subconscious,  in  its  distribution  it  has  become 
unequal,  concentrated  upon  a  minority,  exaggerated  into  obvious 
disparity,  and  therefore  a  conscious  social  sore.  In  the  labor- 
ing ranks  of  actual  life,  whereas  all  are  partially  idle,  only 
occasionally  and  individually  does  the  deficit  assume  the  form 
of  total  idleness,  for  more  or  less  of  the  time. 

In  his  constant  fear  of  this  total  unemployment  each  worker 
will  be  willing  to  exert  to  the  limit  of  his  endurance,  in  order 
to  persuade  his  employer  that  he  is  worth  keeping  upon  the 
pay-roll.  And  the  employer,  holding  in  his  whip-hand  the 
consciousness  of  this  implacable  menace  of  unemployment,  re- 
mains always  in  the  saddle,  strike  or  no  strike,  union  or  no 
union,  wages  rising  or  wages  falling,  and  becomes,  as  a  class, 
steadily  and  uncontrollably  richer  and  richer. 

No  suggestion  for  limitation  of  hours,  nor  for  betterment 
of  conditions,  may  come  from  any  individual  workman,  with 
other  result  than  the  loss  of  his  job.  Labor  continually  finds 
itself  confronted  with  the  choice  between  overwork  to  the  limit 
of  physical  endurance,  or  else  no  work  at  all. 

Society  may  debate  as  it  pleases  the  question  whether  any 
given  schedule  of  work  is  onerous  or  not.  Outside  the  selfishly 
protected  trades-union,  it  cannot  but  be  onerous;  and  often 
within  them  it  is  so.  For  if,  in  any  case,  this  were  not  so, 
to  the  limit  of  endurance,  then  the  universal  deficit  in  employ- 
ment would  promptly  force  those  to  apply  who  could  endure 
more.  Thus  the  schedule  of  effort,  under  pressure  from  the 
deficit  in  employment,  recontacts  continually  with  the  limit  of 
endurance.  Equilibrium  is  found  only  by  the  compression  of 
life  to  its  biological  maximum  of  density,  monotony  and  mal- 
nutrition— traffic  charged  all  it  will  bear. 

Every  instinct  of  self-preservation  and  love  of  family  but 


UNEMPLOYMENT  599 

aggravates  the  evil.  Inevitably  factories  become  congested,  the 
work-day  extended  and  the  task  specialized — all  far  beyond  the 
dictates  of  humanity  or  wisdom.  Thus  arises  the  congestion  and 
dull  monotony  of  factory  and  slum  life — everywhere  the  para- 
doxical combination  of  overwork  for  some  with  none  at  all  for 
others — of  labor  always  striving,  individually  or  through 
unionism,  to  pull  the  planks  of  employment  from  beneath  its 
brothers'  feet. 

Arterial  and  Venal  Economic  Circulation. — Thus  the  wall- 
building  system  of  social  distribution  amounts,  in  effect,  to 
this  following  dual  method  of  circulation.  In  the  one  direc- 
tion wealth,  originating  with  the  producers  alone,  is  being 
transferred  bodily,  arbitrarily  and  artificially  (through  this 
social  delusion  as  to  the  walls)  to  the  wall-people  as  a  class, 
there  to  be  concentrated  unequally  upon  a  few  of  its  individuals, 
In  the  other  direction  comes  back,  as  the  inevitable  counter- 
balance, a  corresponding  and  equal  deficit  in  employment. 
Originating  with  the  wall-workers,  it  is  transferred  bodily  and 
artificially  (through  this  same  social  delusion)  to  the  producers 
as  a  class,  there  to  become  a  source  of  panic,  overwork  and 
poverty  for  all,  and  of  concentrated  idleness  and  destitution  for 
a  few.  Unemployment  is  to  wall-work  what  reaction  is  to 
action. 

Just  as,  among  the  wall-people,  all  are  conscious  of  some 
superiority  in  employment,  income  and  independence,  while 
some  are  very  much  so,  so  also,  among  the  producers,  all  be- 
come conscious  of  some  deficit  below  a  full  demand  for  their 
best  possible  services,  or  for  all  their  time,  while  some  ex- 
perience a  total  lack  of  demand  for  any  of  their  services  at  all. 
It  is  as  natural  and  inevitable  as  a  pig  under  a  plum-tree  that 
superciliousness  should  become  the  ethical  characteristic  of  one 
class,  and  bitter  discontent  that  of  the  other. 

The  Basic  Law  of  Employment  and  Unemployment.— Thus 
ends  the  usefulness  of  the  parable  of  the  wall-builders.  By 
their  every  attribute  they  have  now  been  identified  with  the 
commercialists  of  our  actual,  modern  economic  world.  The 
foolish  public  of  our  imaginary  state,  which  upheld  the  insane 
policy  of  wall-building,  and  thus  made  possible  its  continuance, 
has  now  been  identified  in  every  respect  with  the  actual  public 
of  to-day,  in  so  far  as  it  upholds  and  continues  in  power  that 


600  MODERN   ECONOMIC   TENDENCIES 

self-enthroned  oligarchy  of  commercialism  which  is  undermin- 
ing its  prosperity  and  stability. 

Therefore  from  now  on,  in  this  book,  the  silly,  solemn,  tragic 
superstition  which  holds  that  employment  comes  from  the 
nominal  employers  may  be  frankly  understood  to  be  nonsense, 
at  its  best,  and  treason  to  civilization  at  its  worst.  Employ- 
ment can  come  only  from  the  Ultimate  Consumers — from 
Ultimate  Consumers  who  have  previously  produced.  The  com- 
mercial employers  are  merely  the  non-creative  agents  of  these 
Ultimate  Consumers — sometimes  functioning  also  as  producers, 
but  in  their  commercial  capacities  being  destroyers,  rather  than 
creators,  of  employment. 

From  now  on  the  following  basic  law  determining  the  rela- 
tive volumes  of  average  employment  and  forced  unemployment, 
inevitably  current  in  any  community,  will  be  understood  to  be 
obvious  and  axiomatic,  namely,  that : 

The  aggregate  volume  of  employment  available  bears  the  same 
relation  to  the  natural  productive  power  of  the  community  that 
the  current  aggregate  of  actually  productive  effort  does  to  this 
same  natural  productive  power;  or,  conversely,  thai  there  is 
always  and  inevitably  a  deficit  in  employment,  below  the  natural 
productive  power  biologically  present,  equivalent  to  that  por- 
tion of  the  community's  total  natural  energy  which  is  currently 
being  dissipated  in  commercialism. 

Thus  enforced  unemployment,  on  whatever  lines  it  may  be 
distributed  between  one  person  and  another,  is  in  aggregate  not 
only  an  indubitable  fact,  always  present,  although  varying 
widely  from  time  to  time,  but  it  is  an  inevitable  fact — so  long 
as  we  adhere  to  our  present  economic  delusion  of  relying  only 
upon  selfish  ownership-in-industry,  as  our  means  for  the  main- 
tenance of  plant  and  for  the  interchange  of  commodities  or 
service,  and  upon  pecuniary  profit  as  the  sole  motive  sentiment 
in  industry.  We  might  as  well  try  to  suspend  the  law  of 
gravitation,  or  dodge  the  conservation  of  cosmic  energy — of 
which  latter  principle  this  law  governing  unemployment  is  but 
a  special  phase — as  to  escape  the  penalties  of  this  basic  economic 
law. 

Cherished  Delusions. — Yet  it  is  a  difficult  task  to  persuade 
public  opinion  to  accept  this  scientific  view,  under  all  the 
provocations  of  contact  with  the  problems  of  daily  life.  It  is 
a  most  unwelcome  task,  for  instance,  to  inform  the  many  good 


UNEMPLOYMENT  601 

and  sincere  people  who  are  investing  time,  money  and  energy 
most  philanthropically  in  securing  jobs  for  the  unemployed, 
that  they  are  making  not  the  slightest  dent  upon  the  problem 
of  unemployment — except,  perhaps,  to  prove  the  futility  of  their 
own  efforts. 

For  when  they  feel  such  natural  satisfaction  over  having 
placed,  say,  five  hundred  seekers  after  work  during  the  previous 
year,  it  is  not  pleasant,  however  necessary  it  may  be,  to  dis- 
courage them  to  the  extent  of  pointing  out  the  truth,  namely, 
that  they  have  not  thereby  increased  the  demand  for  labor  by 
a  single  job,  nor  even  by  a  lone  dollar!  Their  five  hundred 
placed  applicants  have  merely  displaced  into  continued  idle- 
ness exactly  five  hundred  other  applicants  who,  except  for  said 
philanthropic  efforts,  would  otherwise  have  found  places. 

For  there  is  not  the  slightest  evidence  that  even  one  of  these 
five  hundred  places  would  have  remained  unfilled,  had  the  em- 
ployment-bureau not  sent  in  its  applicant.  The  employer  would 
surely  have  hired  someone,  in  every  case,  had  there  been  no 
employment-bureau. 

For  there  is  no  fixed  number  of  unemployed,  so  that  efforts 
at  finding  places  for  them  may  hope  ultimately  to  reduce  this 
number.  The  dead  sea  of  enforced  idleness  is  fed  perennially 
from  never-ceasing  fountains.  Those  "fired"  from  jobs  gush 
forth  daily  from  factory  and  office  in  every  corner  of  the  land. 
Like  the  number  of  business-concerns  in  the  land,  which  end- 
less and  active  consolidation  fails  ever  to  reduce,  there  is  a 
continuous,  current  creation  of  newly  unemployed,  which  no 
amount  of  re-employment  suffices  to  soak  up. 

Although  the  rate  of  disemployment  varies  from  day  to  day, 
or  year  to  year,  with  every  fluctuation  of  security-prices  in  Wall 
Street,  yet  given  the  data  for  any  one  date,  the  number  of 
workers  additionally  forced  out  of  a  job  that  day  could  be 
stated  with  accuracy  and  confidence.  For  our  volunteer  workers 
in  employment-bureaus  to  steer  some  fraction  of  this  endless, 
daily  tide  of  jobless  toward  reinstatement,  rather  than  to  let 
re-employment  select  its  personnel  haphazard,  may  be  a  kindly 
— but  it  is  certainly  not  a  helpful — thing  to  do. 

On  the  other  hand,  if  all  these  kind-hearted  and  energetic 
people  would  only  drop  their  futile  methods  and  apply  the  same 
united,  earnest  effort  to  an  attack  upon  commercialism  as  a 
whole — abandoning  the  obvious  but  futile  for  the  strait  and 


602  MODERN   ECONOMIC   TENDENCIES 

narrow  way  of  real  effectiveness — just  as  labor  was  urged  above 
to  drop  its  fight  for  the  obvious,  but  futile,  higher  wage — then 
there  would  result  a  real,  if  not  an  immediate,  remedy  for 
unemployment.  Then,  ultimately,  all  unemployment  would  dis- 
appear automatically  and  permanently.  The  recipe  for  doing 
this  is  given  in  outline  in  Chapter  XXIV. 

The  Competitive  Wage  System. — The  first  light  thrown  by 
this  illuminating  fact  of  a  relentless,  uncontrollable  deficit  in 
employment,  due  to  commercialism,  must  be  devoted  to  clarifying 
the  real  nature  of  the  competitive-wage  system.  For  the  idea 
is  now  fixed  in  the  minds  of  all  wage-earners  who  have  in  any 
way  adopted  the  socialistic  philosophy,  that  the  exploitation  of 
the  poor  is  accomplished  by  means  of  the  low  wage,  and  that 
it  is  the  competitive-wage  system  which  lowers  wages.  Hence 
(they  believe)  emancipation  lies  in  the  direction  of  a  higher 
wage,  and  that  higher  wage  is  to  be  abolished  by  the  abolition 
of  the  competitive-wage  system. 

This  topic  will  be  treated  more  adequately  in  Chapter  XXIV, 
but  the  first  thing  to  be  kept  in  mind  about  it  is  the  influence 
of  this  ever  present  deficit  in  employment.  For  when  that  is 
once  eliminated,  and  the  pressure  of  a  panicky  fear  of  being 
unemployed  is  removed  from  labor,  it  will  be  realized  that  it 
is  not  wage-competition  which  lowers  wages,  any  more  than  price- 
competition  lowers  prices;  nor  is  it  the  low  wage  which  creates 
the  hardship.  It  is  commercial  competition,  even  that  among 
workingmen,  which  elevates  both  wages  and  prices — but  prices 
faster  than  wages — and  so  produces  unemployment.  It  is  high 
wages,  high  prices  and  the  uncertainty  of  employment  which 
create  the  hardship — and  worse,  the  fear  of  hardship. 

Combat  of  any  sort  over  ownership,  wages  or  prices,  whether 
between  businessmen,  or  between  workmen,  or  between  business- 
men and  workmen,  or  between  businessmen  and  Consumers, 
always  raises  prices  first,  then  wages  (more  slowly),  reduces 
consumption,  and  thus  finally  creates  a  deficit  in  employment. 
When  commercialism  shall  finally  have  been  abolished,  the  wage 
will  then  be  much  lower  than  now;  but  it  will  then  buy  far 
more  than  the  higher  wage  of  to-day,  and  there  will  then  be 
no  more  unemployment. 

Yet  the  competitive-wage  system,  then  adjusting  equitably 
the  wage  between  one  wage-earning  Ultimate  Consumer  and 
another,  with  no  employer  in  existence  except  a  third  wage- 


UNEMPLOYMENT  603 

earning  Ultimate  Consumer  acting  as  agent  for  the  two — ad- 
justing the  wage  between  laborer  and  skilled  producer,  between 
imbecile  and  intellectual  alike,  according  to  what  each  pro- 
duces, as  estimated  by  the  Ultimate  Consumer — then  will  be 
still  in  full  swing.  When  capitalism  and  competition  shall 
have  been  completely  abolished — and  with  them,  unemploy- 
ment— the  competitive-wage  system  will  have  survived  the 
change  as  a  harmless  thing,  hated  by  nobody. 

Our  Unfortunate  Lack  of  a  Science  of  Sociology. — 
It  is  a  national  misfortune  that  these  simple  relationships, 
so  directly  the  reverse  of  those  naturally  inferred  by  the  ig- 
norant from  superficial  appearances,  should  not  have  been  taught 
systematically  and  industriously  by  every  professional  teacher 
of  political  economy,  whether  in  college  or  press,  during  the 
last  quarter-century,  at  least.  It  is  worse.  It  is  this  neglect 
which  will  prove  most  directly  responsible  for  our  inability  to 
dodge  the  coming  world-cataclysm — because  there  is  nowhere 
any  organized  body  of  intelligent  public  opinion  which  under- 
stands the  forces  at  work,  anticipates  what  is  coming,  and 
prepares  for  it  in  time. 

The  Impotence  of  the  Oppressed. — It  is  this  broad  fact  of 
a  growing  deficit  in  employment,  due  to  a  growing  volume  and 
intensity  of  commercial  militarism— coupled  with  the  fact  patent 
from  all  history,  namely,  that  it  is  always  impossible  for  the 
oppressed,  as  the  class  most  lacking  power,  to  accomplish  their 
own  liberation — which  has  defeated  the  efforts  of  labor  at  its 
own  emancipation  through  the  shortening  of  the  working-day. 
For  throughout  the  last  century  the  average  length  of  working- 
day  has  steadily  decreased ;  yet  labor  is  more  discontented  than 
ever,  because  its  purchasing-power  has  relatively  decreased  and 
its  employment  become  less  certain. 

A  century  ago  the  standard  workingday  ran  "from  dawn  until 
dark" — often  fourteen  hours.  A  generation  ago  the  ten-hour 
day  was  general.  Now  we  have  virtually  the  eight-hour  day. 
Within  a  week  of  the  writing  of  this  page  labor  has  formulated 
its  demand  for  a  six-hour  day.  Yet  all  this  progress — which, 
according  to  superficial  reasoning,  should  have  doubled  the  de- 
mand for  labor,  or  halved  the  deficit  in  employment — has  left 
the  problem  of  unemployment  in  a  condition  more  threatening 
than  ever  before. 

Thus  the  winter  of  1913-14,  just  before  the  opening  of  the 


604  MODERN   ECONOMIC   TENDENCIES 

Great  War,  was  acute  in  this  respect  beyond  precedent.  The 
later  advent  of  the  war,  by  offering  ample  excuse  for  every  ill 
of  society,  first  hid,  and  then,  by  its  artificially  stimulated 
demands  for  munitions,  largely  canceled  this  symptom;  but  it 
is  only  "for  the  duration  of  the  war."  As  soon  as  peace  has 
been  assured — or  as  soon  thereafter  as  commercialism  can  swing 
through  one  of  its  fairly  periodic  cycles — unemployment  will 
become  the  one  coercive  issue  threatening  the  very  balance  of 
civilization.  For  this  task  no  issue  is  better  fitted  than  is 
unemployment. 

It  is  this  same  stress  due  to  the  deficit  in  employment  which 
forms  the  curse  of  the  sweatshop  system,  where  unions  are 
impotent  to  protect.  It  is  this  same  which  explains  the  large 
futility  of  child-labor  laws,  the  enforcement  of  which  is  so  often 
defeated  by  the  parents,  even  against  the  sincere  efforts  of  the 
employers.  It  is  the  same  which  makes  logical  those  apparently 
unnatural  degenerations  of  human  life  into  quackery  and  fakir- 
dom,  into  professional  gambling  and  horse-racing  (as  contrasted 
with  natural  sport),  into  burglary  or  counterfeiting  requiring 
greater  mechanical  skill  than  honest  mechanical  crafts,  and 
into  prostitution  refined  or  unrefined. 

We  are  accustomed  to  asking  ourselves:  Why  don't  these 
people  turn  their  faculties  to  honest  work  ?  We  fail  to  see  that 
these  are  occupations  to  which  their  devotees  turn,  not  from 
immoral  preference,  but  from  economic  despair  over  attempts 
to  support  themselves  adequately  otherwise.  For  commercial- 
ism not  merely  cuts  off  the  normal  demand  for  wholesome, 
productive  effort.  It  offers  through  the  medium  of  unearned 
incomes  lightly  spent,  practically  unlimited  employment,  with 
fancy  reward,  to  those  who  will  abandon,  to  greater  or  less 
degree,  whether  in  legal  or  illegal  business,  their  moral  scruples. 

The  psychological  "natural  depravity"  or  atavism  so  com- 
monly debated,  by  those  who  see  all  the  problems  and  solutions 
of  life  as  compassed  within  the  individual,  is  usually  about 
the  same  dominant  element  in  these  lapses  that  a  sense  of 
humor  is  in  a  professional  clown.  Indeed,  most  of  the  silly 
clownishness  now  so  common  on  the  stage,  and  in  the  "comic 
sups.,"  arises  in  this  same  way.  In  all  of  these  fields,  and  in 
many  more,  the  artificial  deficit  in  employment  created  by 
commercialism,  and  the  artificial  inducements  developed  by 
the  unnaturalness  of  its  rewards,  develops  all  manner  of  popular 


UNEMPLOYMENT  605 

tendencies,  which  lacking  explanation,  seem  unnatural,  para- 
doxical, degraded  and  inhuman. 

Quantitative  Unemployment. — In  order  to  understand  even 
the  facts,  not  to  mention  the  cause,  of  unemployment,  one 
must  understand  that  one  part  of  the  total  deficit  finds  ex- 
pression as  quantitative  unemployment,  and  another  as  quali- 
tative unemployment.  The  former  refers  to  quantity  of  total 
time  spent  in  idleness.  The  latter  refers  to  a  deficit  in  quality 
of  work  demanded,  below  the  maximum  of  which  the  individual 
is  actually  or  potentially  capable. 

Only  a  minor  fraction  of  the  total  volume  of  unemployment 
appears  in  the  form  of  permanent  idleness,  or  even  of  total 
idleness  for  any  appreciable  fraction  of  the  time.  Nearly  all 
people  are  more  or  less  continually  drifting  into  and  out  of 
employment.  Indeed,  in  the  educated  classes  this  is  not  always 
an  unprofitable  phenomenon.  The  variety  of  tasks  open  to  an 
educated  person  makes  it  wise  to  assure  oneself,  fairly  fre- 
quently, as  to  whether  a  maximum  of  suitability  has  been  at- 
tained or  not. 

But  in  the  lower  grades  of  skilled  and  unskilled  labor  this 
inevitable  drift  of  employment  must  stand  as  an  unmodified 
loss  of  time.  Whatever  may  be  the  minor  irritant  which  causes 
one  move  or  another,  the  net  gain  to  the  workman  is  usually 
zero,  while  his  loss  of  time  stands  as  an  unbalanced  loss. 
Statisticians  of  wages  have  now  well  learned  that  data  as  to 
mere  rates  of  wages  mean  nothing,  without  knowledge  as  to 
the  proportion  of  the  time  employed. 

This  intermittent,  quantitative  brand  of  unemployment,  as 
also  the  next  to  be  considered,  stand  among  the  items  of  dis- 
sipation of  economic  energy  by  commercialism  which  our  tabular 
analysis  of  statistics  quite  failed  to  include.  This  is  one  of 
the  many  reasons  for  regarding  the  conclusions  reached  above 
as  conservative,  however  some  items  classified  as  commercial 
may  at  the  time  have  seemed  strained. 

Qualitative  Unemployment. — Then  it  is  not  always  in 
quantity  of  work  that  the  deficit  in  employment  appears.  There 
is  also  everywhere  observable  a  deficit  in  the  quality  of  the 
employment  to  be  had.  Each  person  is  obliged,  on  the  average, 
to  accept  not  only  intermittent  employment,  and  emplovment 
at  wages  less  (in  purchasing-power)  than  the  value  actually 


606  MODERN   ECONOMIC   TENDENCIES 

produced,  but  also  employment  which  the  worker  always  feels 
is  below  the  grade  of  which  he  is  naturally  capable. 

In  many  cases,  such  as  the  ticket-choppers  of  our  transit- 
systems,  or  the  sandwich-men  or  curbstone-fakirs  on  every  side- 
walk, for  instance,  this  incompetence  of  the  job  is  obvious  and 
undebatable.  But  in  most  cases  this  deficit  in  quality  of  job 
below  the  worker's  natural  capabilities,  although  actually  uni- 
versal, is  not  so  obvious  as  it  is  in  the  childish  folly  of  selling 
and  chopping  up  tickets  by  the  million  per  diem. 

What  is  meant  here  is  that  an  employer  hiring  a  man  who 
might,  at  his  best,  let  us  say,  make  watch-springs,  gets  his  best 
profit  out  of  this  man  by  using  him  to  make  stove-bolts  instead. 
This  is  because  the  workman  can  squeeze  out  a  much  larger 
quantity  of  stove-bolts  per  day  than  he  could  of  watch-springs, 
or  of  any  other  article  in  which  he  was  sufficiently  interested  to 
do  his  best. 

Under  commercialism,  the  prime  desire  of  the  employer  is 
quantity  per  diem.  It  is  on  that,  and  not  on  quality  per  man, 
that  he  makes  his  biggest  profits.  So  long  as  we  continue  to 
regard  profits  as  the  best  form  of  remuneration,  it  will  continue 
to  be  low  cost  to  the  employer,  and  not  high  value  to  the  com- 
munity, which  guides  all  factory-production,  under  commercial- 
ism. And  so  human  life  responds  by  getting  out  a  larger  and 
larger  quantity  of  work,  as  the  quality  that  work  falls  in  the 
scale  of  skill,  intelligence  and  taste. 

Here  again  is  seen  a  manifestation  of  the  operation  of  the 
law  of  economic  equilibrium,  "charging  all  the  traffic  will  bear." 
The  employer  who  is  paid  in  the  form  of  profits  actually  gets 
his  maximum  income  when  he  has  deliberately  restrained  the 
workman  from  exerting  his  best  ability,  by  some  major  fraction 
of  the  latter's  maximum  potentialities. 

In  natural  value  to  the  community  the  man's  output  of 
watch-springs  would  be  far  higher  than  of  stove-bolts,  because 
of  his  greater  interest  in  his  work.  But  in  commercial  valua- 
tion, viewing  the  output  as  a  thing  upon  which  a  profit  must 
be  made  in  the  competitive  world,  the  watch-springs  are  worth 
far  less — to  the  employer — than  the  stove-bolts. 

Automatic  Involuntariness  Again. — In  other  words,  picture 
to  mind  the  Consumer  as  standing  on  one  side,  with  his  twenty- 
cent  dollar  in  his  hand,  selecting  not  what  he  wants,  but  what 
(under  that  limitation)  he  can  buy.  Picture  the  producer  as 


UNEMPLOYMENT  607 

standing  on  the  other  side,  with  the  fear  of  idleness  in  his 
heart.  Picture  standing  between  them  the  employer — caring 
not  a  prune  whether  it  be  stove-bolts  or  watch-springs,  but  with 
a  keen  eye  upon  his  ledger  and  upon  his  competitors — and  it  is 
plain  that  no  one  of  the  three  is  going  to  act  naturally  or 
humanly. 

The  employer  will  determine  the  job  as  mechanically  as  any 
of  the  machines  in  his  factory,  grading  the  work  solely  to  secure 
the  maximum  profit.  The  Consumer,  pinching  his  twenty-cent 
dollar,  will  accept  as  poor  a  grade  of  work  as  his  soul  can 
endure,  while  still  continuing  to  buy  and  live.  The  producer, 
fearing  eviction,  will  accept  a  grade  of  work  far  below  his 
natural  preference,  and  will  turn  out  tons  of  stove-bolts  instead 
of  ounces  of  watch-springs.  Production  and  Consumption  will 
both  have  been  sagged  to  a  minimum  in  quality,  as  elsewhere 
it  has  been  in  quantity,  by  the  institution  of  "charging  all  the 
traffic  will  bear" — by  placing  production  under  the  control  of 
&  man  who  has  been  hired  (by  profits)  to  have  no  real  interest 
in  production. 

Similarly,  when  an  employer  wishes  to  sell  watch-springs, 
he  hires  to  make  them  a  man  who  might,  at  his  best,  make 
telescopes.  And  so  all  along  the  line.  Sometimes  the  higher 
ability  is  already  in  the  man,  but  latent  and  unreleased.  Some- 
times it  is  not  there,  but  could  easily  be  put  there  by  education 
and  opportunity — if  only  there  were  some  rational  system  for 
selling  it,  as  Value-to-the-Consumer,  after  it  had  been  put  in. 

The  commercial  employer  has  no  motive  urging  him  to  give 
his  men  the  best  work  of  which  they  are  capable,  for  he  pays 
only  stove-bolt  wages  to  the  watch-spring  man  for  stove-bolt 
work,  and  watch-spring  wages  to  the  telescope-man  for  watch- 
spring  work.  He  has  no  call  whatever  to  do  otherwise.  His 
sole  aim  in  life  has  been  deliberately  determined  by  society  to 
be  profits,  not  output;  and  his  profits  would  not  be  increased, 
but  diminished  to  the  point  of  bankruptcy,  if  he  gave  to  each 
man  the  best  work,  in  value  to  society,  of  which  he  was  capable. 
For  then  there  would  be  left  no  margin  with  which  to  pay 
profits  and  costs  of  competition,  the  stuff  could  not  be  sold, 
and  so  both  employer  and  workman  must  quit  altogether— 
until  the  Ultimate  Consumers  shall  have  organized  themselves 
for  their  prime  business  in  life:  directing  production. 

It  is  in  this  sense  that  the  bulk  of  all  workers  who  appear 


608  MODERN   ECONOMIC   TENDENCIES 

in  the  statistics  as  employed  are  in  reality  only  partially  so. 
Yet  it  is  just  this  sort  of  unemployment  which  should  be  our 
real  concern;  for  it  is  this  which,  in  its  enormous  aggregate, 
is  most  active  in  producing  that  general  poverty  and  discon- 
tent which  is  now  rife  throughout  all  Christendom.  It  is  be- 
cause the  statistics  concerning  unemployment  can  take  no  cog- 
nizance whatever  of  this  most  important  factor  that  they  have 
been  assigned  to  last  place  in  our  consideration  of  the  subject. 

This  deficit  in  quality  of  job  is  universal  throughout  all  in- 
dustry. It  is  one  of  the  most  penetrative  of  all  explanations 
of  our  social  flaws.  It  operates  at  all  levels  of  economic  ability, 
although  with  differing  degree  of  intensity.  It  explains  why 
our  factories  are  filled  with  machines  performing  the  simplest 
tasks  by  the  thousands  per  hour,  in  the  dreariest  monotony, 
attended  by  operatives  whose  faculties  are  not  in  demand  to 
any  appreciable  degree.  Yet  such  concentration  of  monotony 
quite  fails  to  bring  its  victim  that  natural  return,  either  in  money 
or  in  hours,  for  which  any  person  might  be  expected  to  under- 
take such  a  program. 

Upon  such  operatives  the  sole  demand  is  for  endurance  of 
monotony.  Hence,  since  economic  pressure  always  crowds  life 
to  the  utmost  at  which  life  is  possible  at  all,  their  one  need  is 
diversion,  diversion — diversion  secured  at  any  necessary  sacri- 
fice of  moral  or  esthetic  standards — diversion  of  a  nervous 
system  sometimes  too  exhausted  to  respond  further  even  to  the 
dictates  of  hunger.  Eeally,  to  those  whose  life  has  happened 
to  combine  a  factory-experience  with  the  reading  of  Nicholas 
Nickleby,  the  picture  of  Dotheboys  Halls  is  not  one  whit  ex- 
aggerated. Drudgery  coupled  with  starvation!  Why,  our 
slums  are  peopled  with  Smikes.  The  only  difference  is  that 
Dotheboys  Hall  typified,  nominally,  a  school,  while  our  fac- 
tories and  slums  are  our  real,  and  not  our  nominal,  schools 
for  the  citizens  of  the  next  generation. 

Many  and  diverse  are  the  sorts  of  partially  employed.  It  is 
not  merely  the  typical  factory-hand  who  performs  intensely 
monotonous  tasks  requiring  little  skill.  The  commercial  deficit 
in  proper  employment  is  visible  in  the  millions  of  stenographers 
writing  endless  repetitions  of :  "In  reply  to  yours  of  the  tenth" 
or  "We  know  that  you  will  be  interested,"  when  the  chances 
are  a  hundred  to  one  that  you  are  not.  For  these  typists — if 
they  must  be  at  some  machine  at  all — should  be  aiding  the 


UNEMPLOYMENT  609 

Federal  Commissioner  of  Imports  to  inform  the  Iowa  Commis- 
sion of  Retail  Trade  concerning  the  latest  cargo  to  arrive  from 
Europe,  or  some  author  to  get  out  a  helpful  book.  It  explains 
the  drudgery  of  commercialism  itself,  which  condemns  to  sales- 
manship those  who  long  to  get  into  overalls  and  do  something 
useful,  or  who  might  be  scientists  or  artists. 

The  vast  majority  of  all  small  retail-shop  dealers,  the  counter- 
clerks  in  the  large  stores,  the  middlemen  and  pedlars  dupli- 
cating each  other's  stocks  and  efforts — actively  offering  goods 
at  times  or  places  where  ninety-nine  out  of  a  hundred  accosted 
do  not  want  them,  or  else  dawdling  idly  behind  unneeded  show- 
cases through  over-long  days,  awaiting  some  sporadic  customer 
whom  the  ten  duplicate  shops  had  missed  capturing;  the 
printers  and  multigraphers  who  get  out  silly  circular-letters 
or  other  advertising-matter,  frantically  urging  people  to  become 
excited  over  the  wonderful  color  of  paint  on  the  seller's  new 
brand  of  coffee-mill;  the  many  bookkeepers  posting  numberless 
unneeded  accounts;  the  vapid  chorus-girls,  and  their  even  more 
offensive  fellows,  performing  the  silliest  of  acts,  like  trained 
monkeys,  to  win  the  applause  or  the  ticket-money  of  those 
whose  nerves  are  too  far  racked  by  negotiation  to  enjoy  any- 
thing more  dignified,  or  whose  naturally  low  tastes  have  been 
accorded  by  commercialism  a  command  over  theater-seats  out 
of  all  proportion  to  their  natural  place  in  society ;  the  curbstone- 
fakirs,  acting  the  part  of  children,  and  the  sandwich-men,  as 
pathetic  as  dumb  beasts;  the  fortune-tellers,  gamblers,  petty 
swindlers,  ingenious  counterfeiters  and  daring  burglars,  all 
doing  these  things  because  society  pays  them  for  it,  but  will  not 
pay  them  for  productive  effort;  the  newsboys  and  itinerant 
bootblacks,  matching  pennies  and  "shooting  craps,"  who  ought 
to  be  at  school  or  at  wholesome  play — because  even  in  boot- 
blacking  there  is  a  deficit  in  quantity,  as  well  as  in  quality,  of 
employment. 

All  these  and  a  thousand  others  are  instances  of  people  who 
are  doing  useless  things,  or  things  less  useful  than  might  be, 
merely  because,  in  the  face  of  a  deficit  in  the  aggregate  demand 
for  labor,  they  do  not  know  what  else  to  do.  All  these  are 
partially  or  wholly  unemployed,  usually  in  both  quantity  and 
quality  of  work  together.  Yet  most  of  them  appear  not  at  all 
in  the  statistics  of  unemployment. 

Then  there  are  the  myriad  of  petty  shop-keepers  who  ever 


610  MODERN   ECONOMIC   TENDENCIES 

and  anon,  here  and  there,  start  abortive  little  enterprises  in 
merchandising,  only  to  sell  out  at  a  big  loss  a  few  weeks  or 
months  later.  These  are  already  included  in  our  statistics  as 
commercialists,  species  merchant;  but  in  reality  they  should  be 
classed  rather  as  victims  of  commercialism  than  as  active 
agents.  In  either  case  they  should  be  classed  as  unemployed, 
for  they  are  neither  aiding  the  community  nor  supporting  them- 
selves. Yet  they  escape  all  our  statistics  of  unemployment. 

This  whole  phase  of  sub-quality  of  employment — usually 
coupled  with  overwork,  as  to  hours — as  a  general  feature  which 
permeates  all  grades  of  effort,  may  be  referred  to  hereinafter 
as  the  "ticket-chopper"  sort  of  unemployment;  for,  to  the  city- 
dweller,  there  is  no  more  obvious  instance  of  it  than  the  ticket- 
choppers  of  our  transit-sytems — one  or  more  able-bodied  men 
at  each  station,  slicing  away  for  ten  or  twelve  hours  daily, 
merely  to  destroy  tickets  which  an  equally  wretched  caged- 
canary  spends  an  equal  period  daily  in  selling  at  a  nickel 
apiece ! 

Then  no  mention  at  all  has  been  made  of  the  unemployed 
inmates  in  our  jails,  asylums,  hospitals,  etc.,  many  of  whom 
are  there  as  a  result  of  the  deficit  of  wholesome  employment 
at  adequate  wages  outside,  nor  those  who  are  "employed"  in 
caring  for  them.  Nor  has  any  attempt  been  made  to  include, 
for  instance,  the  police,  idling  away  their  days  upon  beat  or 
in  reserve,  the  product  chiefly  of  that  undercurrent  of  petty 
lawlessness  which  is  iself  the  inevitable  fruit  of  unemployment, 
amongst  the  slums  which  unemployment  has  created. 

For  it  has  been  a  basic  principle  of  this  analysis  to  avoid 
everywhere  the  inclusion  of  features  so  extreme,  or  so  near  the 
line,  as  to  warrant  suspicion  of  muckraking.  What  is  wanted 
is  a  sober,  responsible  determination  of  the  real  nature  of 
commercialism,  with  its  paradoxical  combination  of  over-pressure 
towards  over-long  hours  of  work  linked  with  an  ebb  and  flow 
of  undercurrent  of  unemployment.  Our  conclusions  from  this 
method  of  investigation  are  that,  at  its  very  best,  commercial- 
ism deserves  instant  abolition.  How  to  attain  it  is  quite  another 
question;  but  the  first  step  is  to  decide  upon  the  goal. 

Thus  the  deficit  in  aggregate  hiring-power  in  any  land,  due 
to  the  presence  of  commercialism,  finds  always  a  dual  expres- 
sion, namely: 

(1)  In  a  deficit  in  relative  quality  of  employment  for  vir- 


UNEMPLOYMENT  611 

tually  all — at  least,  outside  the  charmed  circle  of  commercialism, 
and  possibly  even  there — coupled  with  an  over-pressure  for 
endurance  of  long  hours  and  monotony  of  task;  and 

(2)  In  a  deficit  in  absolute  quantity  of  employment  for  a 
shifting  minority,  whereby  they  enjoy  no  work  at  all  during 
a  part  of  the  time. 

Character  and  Unemployment.— The  identity  of  this  minor- 
ity which  falls  fated  to  unemployment  is  determined,  of  course, 
by  its  relative  lack  of  ability.  These  unemployed  are,  on  the 
average,  the  less  able — in  seeking  work,  if  not  in  performing 
it.  While  they  include  those  who  lack  commercial  spirit,  in 
being  too  scientific  or  too  artistic  to  be  able  to  secure  a  liveli- 
hood at  all  commensurate  with  their  tastes,  or  with  their 
natural  usefulness  to  society,  yet  it  includes  also  those  who 
are  idle  because  relatively  incompetent.  With  a  majority  of 
the  unemployed  who  are  industriously  inclined,  at  least  to  the 
extent  of  seeking  work,  it  includes  a  minority  who  are  sheerly 
lazy. 

It  is  this  minor  and  resultant  fact  which  is  responsible  for 
the  widespread,  yet  quite  false,  belief  that  unemployment  is  due 
to  absolute,  rather  than  to  relative,  incompetence — that  these 
people  are  not  employed  because  they  are  incapable  of  anything 
more  useful  to  society  than  idleness. 

Why,  there  is  no  such  person !  There  can  be  no  such  person ! 
There  is  no  person  alive,  whether  competent  or  incompetent, 
who  is  not  more  useful  to  society  employed  than  unemployed! 
There  are  plainly  many  out  of  whom  no  commercial  profit  can 
be  made,  but  there  are  none  who  are  not  useful,  in  the  factory- 
sense,  to  some  Ultimate  Consumer.  Even  with  the  insane — 
sufficiently  irresponsible  to  have  to  be  confined — we  are  now 
learning,  in  a  very  late  and  lame  way,  that  the  first  thing  to 
be  done  for  them  is  to  put  them  to  work. 

Laziness  or  incompetence  determines  who  shall  be  idle;  but 
it  has  no  slightest  influence  over  how  many  shall  be  unemployed. 

If  there  must  be  a  deficit  in  employment — which  is  wholly 
unnatural — it  will,  of  course,  be  the  less  competent  who  will  fall 
into  it.  But  it  is  a  very  foolish  society  indeed  which  can  find  no 
better  use  for  those  who  are  merely  less  able  than  the  average 
for  their  class,  than  to  condemn  them  to  a  wandering  idleness. 
As  an  aid  to  their  becoming  more  competent,  the  debtors' 
prisons  of  a  century  ago — so  helpful  in  lifting  men  out  of  debt 


612  MODERN   ECONOMIC   TENDENCIES 

— were  a  dream  of  heavenly  wisdom  in  comparison  with  our 
present  folly  of  forced  unemployment. 

The  Employer's  Deficit  in  Purchasing-Power. — It  is  fully 
recognized  here  (as  possibly  denying  this  proposition  that  labor 
is  always  underemployed  as  to  quality  of  work)  that  employers 
are  always  complaining  most  sincerely  of  their  inability  to  find 
competent  labor.  This  general  deficit  in  quality  of  labor  offered, 
as  viewed  from  the  employer's  standpoint,  is  just  as  universal, 
unquestionable  and  significant  a  phenomenon  as  is  the  universal 
surplus  in  supply  of  labor,  as  to  quantity,  over  commercial  de- 
mand. Indeed,  the  two  are  but  symptoms  and  parts  of  one 
whole. 

These  employers  may  continue  to  grumble.  Under  that  in- 
creasing commercialism  for  which  they  themselves  are  as  re- 
sponsible as  any,  the  situation  is  sure  to  grow  steadily  worse 
in  this  respect.  When  they  attempt  to  hire  labor,  as  now, 
with  a  dollar  four-fifths  diluted,  as  to  purchasing-power,  by  this 
same  commercialism,  they  are  doomed  to  a  disappointment  as 
inevitable  as  that  awaiting  every  other  purchaser  of  any  other 
commodity  whatever. 

The  provision-dealer  can  no  more  supply  food  of  the  quality 
and  price  which  the  Consumer  deems  right,  nor  the  railroads 
give  transportation  on  the  fares  urged  by  the  public  commis- 
sions, while  our  community-coin  continues  to  be  a  twenty-cent 
dollar,  than  the  laboring  world  can  breed  and  educate  labor  on 
the  diluted  purchasing-power  now  offered  by  commercialism  as 
a  wage.  A  universal  and  increasing  deficit  in  quality  and 
quantity  of  supply,  and  of  contentment  with  the  result,  is  the 
whirlwind  which  we  everywhere  must  reap,  on  both  sides  of 
the  capital-labor  fence,  from  our  superstitious  faith  in  the 
heavenly  sacredness  of  selfishness,  when  organized  into  a  na- 
tional system  of  owner ship-in-industry,  and  our  lack  of  faith 
in  the  good  old  wage-paid  factory-system,  as  supplying  all  the 
motives  necessary  for  industry  and  expansive  enterprise. 

Before  any  other  question  may  come  before  the  court  of  fate, 
labor  must  be  paid  with  a  hundred-cent  dollar.  Labor  must 
be  fed,  employed,  educated,  amused,  given  hope  and  granted 
a  sense  of  justice — all  through  receipt  merely  of  the  value 
of  what  it  produces — before  it  may  be  expected  to  embody 
ability,  contentedness  or  patriotism.  The  employers  will  never 
find  labor  matching  what  they  regard  as  its  opportunity  until 


UNEMPLOYMENT  013 

they  have  made  the  opportunity  precede  the  labor.  This  can 
be  accomplished  only  by  the  abolition  of  all  ownership-in- 
industry. 

For  instance,  the  author,  as  a  teacher  of  engineering  for  a 
dozen  years,  has  had  many  interviews  with  alumni  who  returned 
to  the  Institute  as  successful  employers.  Each  of  these  had  a 
friendly  criticism  to  offer  as  to  the  Institute's  courses  of  study. 
According  to  each  of  them,  the  school  was  not  turning  out  the 
right  sort  of  graduates. 

Yet  in  every  case  it  developed,  upon  inquiry,  that  what  each 
employer  regarded  as  this  "proper"  sort  of  graduate  was  the 
one  best  fitted  for  helping  this  particular  employer  make  money. 
Such  a  graduate  might  be  very  poorly  fitted  for  helping  the 
average  other  employer  make  money,  and  not  at  all  fitted  for 
usefulness  as  a  citizen  to  society  as  a  whole,  because  two  nar- 
rowly trained  and  specialized.  This  made  no  difference  to  these 
critics.  Each  of  them  looked  at  life  through  spectacles  which 
must  have  had  their  rims  cut  from  silver  dollars. 

Then  the  commercial  employer  must  remember  that  even  that 
overwork  and  worry  on  his  own  part  of  which  he  so  often  com- 
plains— which  alternates  with  the  unwelcome  unemployment  of 
his  factory  said  to  be  due  to  "over-production"  (which  it  is  not) 
— is  enforced  by  that  same  commercialism  which  causes  the 
deficiency  in  quality  of  labor  offered.  Yet  he  never  thinks  of 
taking  this  cause  to  task  for  its  many  sins.  I  have  heard  one 
manufacturer  after  another  complain  of  the  intolerable  costs  of 
advertising,  of  ruination  by  price-cutters  and  other  commercial 
privateers,  and  of  interminable  pressure  from  both  sides — trades- 
unions  and  strikes  on  one  side;  competitors  and  legislatures  on 
the  other — squeezing  all  the  profit  and  pleasure  out  of  life.  Yet 
not  one  of  them  will  admit  for  an  instant  the  wisdom  of  calling 
all  this  by  its  right  name — organized  anarchy — and  of  escaping 
it  all  by  conducting  all  industry  as  he  conducts  his  own  factory: 
by  excluding  all  ownership-in-industry  and  all  license  to  com- 
pete. Each  of  them  will  repudiate  the  suggestion  that  he  him- 
self should  be  made  the  salaried,  non-owning,  sole  national  com- 
missioner of  his  own  line  of  production,  freed  forever  from  the 
harassments  of  commercial  competition. 

The  Universal  Economic  Paradox. — Thus  every  contract  be- 
tween employer  and  workman,  and  every  lockout  and  strike,  must 
be  approached  by  the  student  of  economics  in  recognition  of  a 


614  MODERN   ECONOMIC   TENDENCIES 

sincere  belief  on  the  part  of  the  employer  that  he  is  getting  help 
which  is  far  below  what  he  ought  to  have  in  quality,  and  that  he 
is  paying  for  it  more  than  he  ought;  and  also  of  an  equally 
sincere  belief  on  the  part  of  the  workman  that  he  is  performing 
tasks  below  the  best  grade  of  which  he  is  capable,  and  that  he  is 
being  paid  for  their  performance  less  than  they  are  worth. 

But  these  familiarly  opposite  and  inconsistent  attitudes  may 
not  be  explained  away  on  the  ground  of  frail  human  bias  and 
contrariness,  whereby  each  side  maliciously  looks  at  the  same 
thing  in  an  oppositely  erroneous  way.  That  is  to  miss  the  whole 
point  of  the  case.  The  significant  and  instructive  fact  is  that 
both  sides  are  right  simultaneously.  Each  of  these  apparently 
inconsistent  beliefs  is  simultaneously  true. 

For  the  workman  is  right  in  feeling  that  his  wages  are  too  low, 
because  he  is  being  paid  in  dollars  worth  only  twenty  cents  each. 
The  employer  is  right  in  feeling  that  the  work  is  below  standard, 
because  he  is  using  help  which  has  been  bred,  fed  and  educated 
upon  a  milk-and-water  income  of  that  sort. 

The  workman  is  right  in  feeling  that  the  task  is  below  his 
natural  best,  because  he  is  executing  twenty-cent  shop-orders  for 
some  Ultimate  Consumer  who  paid  full  dollars  across  the  shop- 
counter.  The  employer  is  right  in  feeling  that  wages  are  too 
high,  because  he  has  to  pay  enough  dollars  so  that,  even  if  they 
are  worth  only  twenty  cents  each,  they  may  still  come  somewhere 
near  to  supporting  the  workman. 

This  book  elsewhere  takes  the  position,  in  regard  to  the 
struggle  between  capitalism  and  labor  over  the  rates  of  wage, 
that  this  is  interminable — at  least,  by  any  conceivable  decisive 
and  final  victory  of  either  side  over  the  other.  The  foregoing 
paragraphs  furnish  one  of  several  foundations  for  this  position. 
Viewing  merely  the  cause  of  conflict  visible  in  this  deficit  in 
employment  on  one  side,  and  of  quality  of  labor  on  the  other, 
it  is  plain  that  capitalism  and  labor  are  at  loggerheads  over  a 
matter  in  which,  accepting  commercialism  as  inevitable,  both  are 
right  and  neither  is  wrong.  The  utmost  victory  on  either  side, 
in  such  a  case,  would  do  nothing  to  remove  this  deficit,  the 
source  of  all  the  friction,  and  so  step  not  an  inch  forward  toward 
a  permanent  solution. 

Life,  Labor  and  Hope,  all  Charged  all  they  can  Bear. — 
Thus  this  deficit  in  demand  for  all  and  the  best  of  life,  due  to 
our  partial  dissipation  of  our  economic  energy  in  commercial 


UNEMPLOYMENT  615 

combat,  finds  its  expression  not  alone  where  it  is  created,  but  in 
every  walk  of  life.  This  sort  of  economic  pressure,  like  every 
other,  is  transmitted  throughout  the  body  economic  in  perfect 
fluidity. 

There  are  all  manners  of  variations  in  the  form  and  degree 
of  discontent  resultant  from  it,  but  there  are  none  in  kind.  In 
each  grade  or  layer  of  life  there  prevails  the  feverish  struggle  to 
avoid  being  caught  by  the  deficit  in  employment,  the  heroic 
effort  to  make  a  twenty-cent  dollar  bring  up  a  family  of  children 
to  a  grade  of  life  as  high,  or  higher,  than  that  in  which  the 
parents  earned  the  dollar,  and  an  equally  discouraging  attempt 
to  get  something  productive  done  with  the  aid  of  labor  paid 
with  twenty-cent  dollars. 

In  each  layer  or  class  exists  only  a  minority  which  finds  life 
really  easy — the  few  who  inherit  that  fortunate  combination  of 
natural  faculties  in  excess  of  ambition  or  temptation,  with  an 
independent  income,  or  else  an  inborn  faculty  for  commercial 
success,  which  makes  of  life  a  smooth  and  joyous  pathway  from 
childhood  to  the  grave.  But  in  each  stratum  also,  in  contrast 
with  these,  the  vast  majority  finds  life  more  or  less  "just  en- 
durable," because  at  every  point  it  has  been  sagged  by  its 
burden  of  commercialism  "all  it  will  bear" — with  this  fact  always 
indicated  by  the  current  failure  of  a  minority  to  bear  it. 

Each  person's  instinctive  sense  of  his  own  natural  abilities  and 
destiny  in  life  finds  a  deficit  in  life-support  and  opportunity — 
whether  dietetic,  artistic,  scientific  or  social — and  a^deficit  in 
both  certainty  and  quality  of  employment.  So  long  as  we  are 
content  to  remain  ruled  by  commercialism,  this  subconscious 
sense,  however  exaggerated  at  times  by  vanity  or  a  too  vivid 
imagination,  must  rest  always  upon  a  basis  of  fact. 

The  "Starvation- Wage. "—In  each  class  or  layer  of  life,  be- 
low its  minor  complement  of  foam  which  floats  in  the  sunshine 
above,  there  exists  always  the  major  substratum  of  its  members, 
the  solid  strength  of  society,  which  is  enjoying  what  can  only 
be  called,  properly,  its  "starvation-wage/'  This  is  not  neces- 
sarily any  literal  starvation  of  stomach,  nor  even  an  obvious 
emaciation  of  any  of  the  parts  of  life;  but  nevertheless  the 
lowest  depression  of  nutriment  of  body,  mind  and  spirit  which 
is  consistent  with  continuity  of  life  from  generation  to  genera- 
tion— the  minimum  income  of  commodities,  of  leisure,  of 
pleasure  from  work  or  play,  of  hope  based  upon  progress — upon 


616  MODERN   ECONOMIC   TENDENCIES 

which  the  class  can  maintain  that  joy  in  life  which  will  permit 
it  to  reproduce  itself  permanently,  in  the  face  of  all  accidents, 
without  slow  decadence. 

The  "Submerged  Tenth. "—Below  this  major  substratum 
of  each  class,  again,  lies  another  and  a  smaller  one.  This 
must  be  called  the  "submerged  tenth" — the  unfortunate  lag- 
gards of  life  who  would  like  to  acquire  the  starvation-wage  if 
they  could,  but  who  fail  even  in  that.  They  by  no  means  all 
live  in  the  slums. 

Intermittently  these  find  employment  in  the  class  to  which 
by  taste  and  ambition  they  belong.  But  the  idle  spells  in- 
crease in  number  and  length,  through  the  natural  result  of  idle 
spells.  Gradually  the  struggle  weakens.  Slowly  or  suddenly 
the  victim  loosens  his  grip  upon  life. 

Sometimes  gradually  and  imperceptibly,  sometimes  violently 
and  dramatically,  he  (or  she)  slips  out  of  sight  from  the 
class  where  so  brave  a  struggle  was  made  to  maintain  existence, 
to  find  peace  in  the  obscurity  of  the  class  below — if  there  be 
a  class  below — or-  in  the  grave  if  there  be  none.  For  it  is  the 
fragments  of  life  thus  ground  off  from  the  lowest  economic 
grade  by  the  attrition  of  commercial  impact  and  friction,  and 
which  can  find  no  lower  level  into  which  to  sink,  which  there- 
fore fill  our  hospitals,  asylums,  courts  and  prisons  for  a  time, 
on  their  way  to  final  dissolution. 

The  Basis  for  True  Optimism.  —The  author  is  too  much  of 
an  optimist  to  leave  unbalanced  so  depressing  a  picture  as  this. 
If  this  were  all,  humanity  must  be  gravitating  steadily  down- 
ward as  the  decades  pass. 

But  this  is  not  all.  The  great  and  as  yet  imperfectly  de- 
fined, but  constantly  active,  forces  of  automatic,  subconscious, 
natural  biologic  growth  are  everywhere  contending  with  these 
artificial,  corroding,  eroding,  social  processes  of  commercial 
wear  and  tear  which  man,  in  his  folly  and  mental  inertia,  has 
allowed  to  grow  upon  himself  in  the  night. 

Civilization  as  a  whole  is  undoubtedly  progressing ;  but  it  never 
advances  smoothly,  with  all  its  parts  moving  in  parallel  and 
at  the  same  rate.  As  no  other  phenomenon  in  the  universe 
ever  progresses  in  this  way,  why  should  we  expect  it  of 
humanity  ? 

Mankind  has  always  advanced  by  increasing  first  its  mere 
population,  its  crass  quantum  of  life.  It  has  then  directed 


UNEMPLOYMENT  617 

that  surplus  of  new  life  into  a  sacrifice  of  itself  in  order  to 
bring  the  conditions  of  life  into  consonance  with  the  needs  of 
still  more  life — either  in  the  endless  petty  duties  involved  in 
raising  progeny,  or  else  in  the  overthrow  of  some  great  public 
wrong  or  other,  inherited  from  the  past  and  now  rendered  in- 
tolerable by  its  mere  contact  with  the  new  quantum  of  life. 
It  does  this  in  order  to  make  the  world  permanently  habitable 
in  the  future  for  ever  larger  populations,  each  of  which  will 
create  for  itself,  as  it  arrives,  its  own  new  life-task. 

Procreation,  in  its  modern  sense,  is  not  completed  with  the 
adolescence  of  the  individual,  ~but  only  with  the  continual  crea- 
tion of  a  new  social  order  fit  to  permit  the  life  of  the  new 
individual — of  an  ever  larger  number  of  such  individuals. 

Thus,  as  these  pages  are  being  written,  American  youth  is 
spilling  its  best  blood  in  overthrowing  Prussian  militarism.  Its 
next  opponent  will  be  our  own  American  commercial  autocracy, 
soon  to  be  disclosed  in  its  true  light  as  suddenly  as  Prussian 
military  autocracy  was  disclosed  in  1914,  or  as  the  true  nature 
of  negro-slavery  was  disclosed  in  April,  1861,  to  those  who  had 
mobbed  the  abolitionists  only  shortly  before. 

The  Natural  Strife  of  Life.— Thus  do  the  forces  of  biologic 
growth  create  constantly  an  unending  upward  current  of  new 
and  hopeful  humanity,  faster  than  commercialism  can  mar, 
sodden  and  destroy  it.  Life  comes  ever  from  below.  This  is 
why  we  see  life  as  ever  rising,  yet  the  average  result  disap- 
pointingly stationary.  The  risen,  cultured  classes  are  never 
self-propagative.  They  must  be  recruited  continually  from 
below,  by  this  ebbless  tide  of  fresh,  ambitious  young  life, 
fostered  by  devoted  parents. 

But  this  fact  should  not  disguise  the  parallel  fact  that  com- 
mercialism, nevertheless,  is  itself  growing  simultaneously  and 
acceleratingly.  The  new  life  does  not  annul  commercialism, 
as  it  rises.  It  merely  accumulates  in  parallel,  as  commercialism 
is  itself  accumulating  simultaneously,  toward  the  day  of  in- 
evitable conflict  between  the  two. 

In  the  meantime  commercialism,  like  Prussian  militarism — 
except  that  it  is  not  so  conscious  of  what  it  is  doing — defiles 
what  it  cannot  destroy.  Downward  through  this  always  rising 
tide  of  biologic  growth  sink  ever  the  victims  of  its  artificial 
antagonisms — those  starved  by  its  gratuitous  wastes,  the  cur- 


618  MODERN   ECONOMIC  TENDENCIES 

rent  precipitate  of  solid  particles  of  dead  life-dust  into  which 
mankind  has  been  degraded  by  its  acid  poison. 

In  this  dual  interaction  between  upward  growth  and  down- 
ward precipitation  of  life,  the  role  of  commercialism  is  purely 
that  of  the  deterrent  and  destructive.  It  is  the  counterpart, 
in  social  energetics,  of  what  impact,  friction,  radiation,  absorp- 
tion and  impedance  are  in  material  energetics.  Both  econom- 
ically and  morally,  the  effect  of  commercialism  is  wholly  evil. 
What  progress  we  see  about  us  occurs  in  spite  of  it,  and  not  by 
its  aid. 

The  Basic  Economic  Contrast  again. — In  this  unending 
balance  between  action  and  reaction,  between  force  and  fric- 
tion, between  life  and  commercialism — in  the  field  of  social 
energetics — we  find  economics  and  ethics  jostling  each  other 
rudely.  Contrast,  for  instance,  the  ethical  standards  surround- 
ing an  applicant  for  a  job  with  those  surrounding  a  prospective 
buyer.  In  each  case  the  act,  economically  speaking,  is  the  same, 
namely,  the  exchange  of  money  for  service  wrought  in  com- 
modity-form. But  in  the  latter  instance,  because  of  the  deficit 
in  the  community's  purchasing-power,  there  are  fewer  buyers 
than  goods  offered.  In  the  former  instance,  because  of  the  com- 
munity's deficit  in  hiring-power,  there  are  fewer  jobs  than 
laborers  offering  themselves. 

Therefore  the  seeker  after  work  must  call,  usually,  before 
seven  in  the  morning.  He  must  stand  in  line,  often  unsheltered, 
in  rain  or  mud,  and  always  unseated,  until  some  petty  authority 
of  foreman  or  assistant  superintendent  finds  time  to  interview 
him  and  to  tell  him,  usually,  that  he  is  not  wanted.  Often 
he  is  driven  away  without  even  this  touch  of  the  human,  by 
placards  announcing  that  no  help  is  wanted. 

This  experience  he  must  repeat  many  times,  wandering  aim- 
lessly and  wearily,  often  for  days,  weeks  or  even  months.  There 
is  no  experience  in  life  so  surely  degrading  and  demoralizing 
than  thus  to  be  taught,  by  manner  as  much  as  by  word  or 
fact,  that  society  regards  your  existence  as  not  worth  utilizing 
or  maintaining,  nor  scarcely  even  tolerating. 

The  Manufacture  of  Ethics. — Whether  this  converts  one, 
through  inhibition,  into  a  disgusting  beast,  or  through  despair 
into  a  suicide,  or  through  enterprise  into  a  burglar  or  a  vin- 
dictive enemy  of  all  mankind,  in  a  natural  spirit  of  self-defense, 
is  purely  a  matter  of  chance  and  temperament.  Some  such 


UNEMPLOYMENT  619 

result  is  inevitable.  Of  the  three,  the  enterprising  one  is  cer- 
tainly the  least  objectionable.  Criminals  are  preferable  to 
bestiality. 

Thus  criminals  and  anarchists  we  are  manufacturing  daily, 
more  diligently  and  efficiently  than  any  other  line  of  goods.  It 
is  the  young  men  who  are  denied  properly  paid  jobs  as  machin- 
ists who  fill  our  prisons  and  reformatories  with  their  three- 
quarters  quota  of  "youths  under  twenty-five."  It  is  the  girls 
denied  natural  return  from  dressmaking,  or  barred  from  mar- 
riage by  the  unemployment  or  poverty  of  the  young  men,  who 
go  astray. 

Selling. — But  view,  in  contrast  with  the  fate  of  the  applicant 
for  work,  the  lot  of  the  would-be  purchaser  of  goods.  Every- 
where he  receives  courteous  attention,  if  not  sheer  flattery  and 
sycophancy.  Whatever  bodily  comfort,  or  even  palatial  luxury, 
is  feasible  for  the  short  time  of  stay,  is  always  supplied.  A 
minimum  of  delay  or  inconvenience  is  always  combined  with 
a  maximum  of  cajolery.  Deference  is  paid  to  every  slightest 
whim.  Except  as  the  very  nature  of  the  market-system  denies 
the  possibility  of  informing  the  purchaser  truly  where  what 
he  wants  is  to  be  found,  limitless  care  is  taken,  often  regardless 
of  expense,  to  aid  him  in  making  his  selections — provided,  of 
course,  he  selects  from  the  seller's  stock. 

Apparently  the  Consumer  is  lord  of  the  commercial  universe. 
But  if  he  believes  all  this  bluff  he  is  the  worst  duped  mortal 
who  ever  mistook  pretense  for  reality.  For  every  bit  of  this 
expensive  flattery  is  charged  up  to,  and  collected  from,  the 
Consumer  himself — together  with  the  cost  of  a  lot  more  which 
he  doesn't  get.  And  every  bit  of  all  this  expense  goes,  in  effect, 
to  prevent  him  from  getting  what  he  wishes. 

The  Function  of  Credit  in  Employment  and  Unemploy- 
ment.— The  instrument  of  commercialism  through  which  is 
exerted  primarily  the  pressure  which  produces  unemployment 
on  the  one  hand,  and  competition  for  patronage  on  the  other, 
is  credit.  It  is  upon  its  credit-instruments,  put  into  motion 
among  the  safe-deposit  vaults  of  the  financial  district,  that 
society  now  relies  almost  wholly  for  those  transfers  of  supply 
and  demand,  in  the  world  outside,  which  keep  every  appliance 
of  industry  in  use.  The  momentary  volume  of  business,  pro- 
duction and  employment  is  determined  almost  wholly  by  the 
momentary  condition  of  the  credit-system,  and  not  at  all  by 


620  MODERN  ECONOMIC  TENDENCIES 

the  skill  and  cajolery  of  the  salesman,  nor  by  the  needs  of  the 
Consumer.  While  the  Consumer  steadily  desires,  and  while  the 
salesmen  cajole  unremittingly,  the  volume  of  available  employ- 
ment expands  and  contracts  constantly,  widely  and  sometimes 
violently,  in  sequence  with  the  spasms  of  the  credit-market. 

Thus,  for  one  recent  instance,  nearly  two  thousand  workmen 
who  were  engaged  upon  a  task  in  a  remote  mountain-district 
of  a  western  State  were  told  at  eleven  o'clock  one  forenoon  that 
at  noon  they  would  be  "laid  off" — out  of  a  job.  They  were 
hundreds  of  miles  from  home.  Few  possessed  stocks  of  money 
or  clothing.  None  had  received  any  warning  to  secure  any 
other  occupation.  The  whole  thing,  in  effect,  was  hideously 
cruel  and  unjust. 

Yet  the  author  has  known  personally  the  employers  of  these 
men  for  many  years,  and  knows  that  they  are  neither  cruel 
nor  unjust  by  nature.  Nor  had  the  incident  the  slightest  con- 
nection with  any  alteration  in  public  demand  for  the  work  in 
hand.  The  sole  explanation  was  that  overnight  the  national 
credit-system  had  collapsed,  to  a  point  where  no  money  was 
available  either  for  pay-roll  or  supplies,  had  the  work  been 
continued. 

The  Credit-Barometer. — Yet  it  is  not  true  to  state  that 
either  employment  or  unemployment  is  strictly  proportional 
to  the  momentary  volume  of  credit.  As  with  the  barometer 
for  indicating  weather,  it  is  the  rate  of  change  in  the  credit- 
barometer  which  indicates  storm  or  calm  in  the  employment- 
sky. 

A  sudden  collapse  of  credit  means  acute  unemployment.  A 
rapid  expansion  of  credit  means  temporarily  a  large  demand 
for  labor.  But  in  the  long  run  the  expansion  of  credit  results 
in  unemployment — not  because  of  the  credit  itself,  which  always 
aids  employment,  but  because  of  the  burden  of  interest-pay- 
ments now  artificially  attached  to  our  credit-instruments,  which 
gradually  cut  down  the  purchasing-power  of  the  people. 

The  result,  under  commercialism,  of  a  period  of  good  in- 
tangible credit  is  the  automatic  expansion  of  the  volume  of 
tangible,  interest-bearing  credit-instruments.  Then  employment 
is  good.  But  when,  finally,  the  overreach  of  this  process,  and 
the  growing  burden  of  interest  and  commercial  costs,  has  brought 
about  a  reaction  in  intangible  credit,  then  the  tangible  credits 


UNEMPLOYMENT  621 

prove  not  to  be  designed  for  reversing  the  method  of  their 
growth,  to  dwindle  gradually  in  number  or  volume,  by  being 
retired,  as  they  had  grown.  Instead,  while  remaining  stationary 
in  number  and  in  face-value,  they  contract  temporarily  in 
valuation. 

But  this  means  that  our  principal  circulating-medium, 
amounting  to  over  ninety-five  per  cent  of  our  total,  has  suffered 
this  collapse.  Therefore  all  industry  and  business  must  con- 
tract their  activities  correspondingly,  and  many  men  are  thrown 
out  of  work.  Thus  the  momentary  volume  of  unemployment 
varies  widely,  and  apparently  erratically,  although  the  biological 
activities  which  lie  at  its  origin  keep  steadily  at  work — or  as 
nearly  so  as  they  can,  in  the  face  of  the  reactions  coming  from 
these  erratic  actions  of  the  credit-system. 

Statistics  of  Unemployment. — A  study  of  these  expansions 
and  contractions  of  credit,  in  what  are  known  as  panics  or 
crises  alternating  with  prosperity,  will  be  taken  up  in  the  next 
chapter.  In  the  meantime  the  statistical  history  of  unemploy- 
ment, so  far  as  we  possess  any,  may  be  reviewed.  But  the  post- 
ponement of  statistics  to  the  latter  end  of  this  investigation 
has  been  intentional;  for  the  sort  of  unemployment  which  is 
of  the  most  vital  importance  to  the  country — the  floating  deficit 
in  quantity,  and  the  universal  deficit  in  quality,  of  employ- 
ment— cannot  be  subjected  to  statistical  measurement. 

But  the  relegation  of  statistics  to  second  place  does  not  mean 
that  they  fail  to  support  our  main  argument.  Whatever  light 
they  may  shed  upon  the  problem  shows  unemployment  to  be 
rapidly  upon  the  increase.  They  show  it  as  increasing  in 
parallel  with  commercialism,  and  in  sensitive  sequence  with  the 
credit-barometer. 

The  United  States  Census  Bureau  first  secured  data  as  to 
unemployment  in  1880 ;  but  the  results  were  not  tabulated, 
partly  because  of  the  labor  involved  and  partly  because  of 
"grave  doubt  as  to  their  reliability/'  Virtually  the  only 
census-data  available  are  those  from  the  reports  for  1890  and 
1900,  but  for  these  years  they  are  fairly  complete. 

The  census  for  1910,  through  one  of  those  lapses  in  common 
sense  in  high  places  which  are  difficult  to  comprehend,  entirely 
neglected  the  topic  of  unemployment — about  the  most  vitally 
important  field  for  statistical  investigation  which  is  open  to  the 


622  MODERN   ECONOMIC  TENDENCIES 

present  generation  of  students  of  sociology.  For  it  bears 
directly  upon  the  degree  of  contentment,  justice  and  even 
stability  of  our  entire  social  organism. 

When  the  mob  which  surged  by  the  palace  at  Versailles  looked 
to  Louis  XVI  like  a  riot — but  in  reality  was  a  revolution  which 
later  guillotined  him — it  was  there  primarily  because  its  mem- 
bers were  unemployed.  The  tidal  wave  of  Bolshevism  which  has 
now  inundated  eastern  Europe,  which  has  all  but  undermined 
the  foundations  of  the  tottering  German  government,  and  which 
has  already  seeped  into  the  cellars  of  our  American  institutions 
in  menacing  volume,  is  no  insane  freak,  to  be  subjugated  by 
disdain,  anathema  and  force.  It  is  a  perfectly  natural  phe- 
nomenon, the  inevitable  result  of  unemployment,  overwork  and 
under-purchasing-power.  It  will  get  its  answer  to  its  relent- 
less demands  only  when  all  these  cruel  follies  have  been  abol- 
ished at  once,  by  the  complete  abolition  of  commercialism. 

Yet  our  latest  national  census  disdains  to  consider  any  such 
an  issue  as  that!  Because  ideal  accuracy  is  unattainable  in 
statistics  as  to  unemployment,  it  prefers  to  leave  us  altogether 
in  the  dark — while  the  mobs  gather — to  grope  our  way  blunder- 
ingly, without  guidance  from  those  responsible  for  that  func- 
tion, until  the  path  has  suddenly  become  illumined  with  the 
inextinguishable  glare  of  explosion  and  conflagration,  both 
literal  and  figurative  I1 

1  The  contract  for  the  publication  of  this  book  is  signed  as  the  federal 
census  for  1920  is  being  taken;  therefore  these  warnings  may  not  be 
fruitful  until  1930— too  late. 

The  ebb  and  flow  of  the  tides  of  unemployment  has  happened  to 
bring  the  taking  of  this  census  at  a  period  of  unusually  low  tide  in 
unemployment.  This  is  due  to  the  recent  manufacture  by  the  allied 
governments  of  over  two  hundred  billions  of  dollars  worth  of  fiat  money, 
printed  on  the  press  of  patriotism.  The  bulk  of  this  money  has  been 
expended  in  this  country.  This  gratuitous  injection  into  the  situation 
of  this  huge  sum  of  artificial  purchasing-power  has  of  course  minimized, 
temporarily,  the  normal  deficit  in  employment.  Wages  are  high  ar.d 
employment  active — but  with  prices  rising  ominously. 

We  have  not  yet  begun  in  earnest  to  pay  the  interest  upon  this  vast 
indebtedness,  still  less  to  pay  the  commercial  costs  involved  in  the 
whirlwind-expansion  of  commercialism  instigated  by  this  crass  expansion 
of  the  world's  volume  of  credit.  Still  less  have  we  faced,  yet,  the 
problem  of  repaying  the  principal  of  this  huge  debt.  But  within  a  few 
years  this  reaction  from  our  recent  action  is  sure  to  come,  and  then 
we  may  expect  such  a  tidal  wave  of  unemployment  to  sweep  over  the 
entire  civilized  world  as  has  never  before  been  experienced. 


UNEMPLOYMENT  623 

The  Census  and  Unemployment.— The  census-returns  for 
1890  and  1900,  when  compared,  show  a  marked  increase  in 
unemployment  during  the  intervening  decade.  Nor  can  this  be 
attributed  merely  to  the  prevalence  of  momentary  prosperity 
during  just  the  time  when  the  census  of  1890  was  being 
enumerated,  while  times  were  relatively  worse  when  that  of 
1900  was  recorded;  for  the  facts  lie  just  the  other  way.  The 
year  1900  was  the  second  after  the  inauguration,  in  1898,  of 
the  most  pronounced  period  of  commercial  prosperity  which 
we  have  enjoyed  since  the  Civil  War,  and  which  grew  in  degree 
until  1903. 

The  figures  as  to  this  comparison  between  1890  and  1900 — 
for  all  trades  together,  for  separate  classes  of  trades,  and  for 
single  selected  trades — are  given  in  Table  68.  It  will  be  noticed 
from  this  table  that  the  fact  of  unemployment  (although  not 
its  penalties)  falls  nearly  equally  upon  the  several  classes  of 
occupation,  quite  without  regard  to  whether  any  given  occupa- 
tion be  a  source  or  a  victim  of  the  forces  which  create  unem- 
ployment. Thus,  the  occupation  of  "agents,  bankers,  brokers, 
officials,  etc./'  shows  a  rate  of  increase  in  percentage  of  un- 
employed which  is  nearly  as  high  as  any  other,  except  laborers, 
servants,  seamstresses  and  female  servants;  but  the  suffering 
involved  is  of  course  far  less. 

Organized  Labor  and  Unemployment. — Aside  from  the  fed- 
eral census  there  are  numerous  reports  from  various  individual 
States,  usually  dealing  with  the  percentages  of  unemployed  in 
the  registered  trades-unions.  To  collect  these  into  a  single 
safe  review  of  the  country  as  a  whole,  if  possible  at  all,  would 
consume  an  entire  treatise.  Moreover,  these  unions  represent 
just  that  class  of  labor  which  suffers  least  from  unemployment, 
namely,  that  which  is  organized  for  fighting. 

But  it  is  upon  the  unorganized  and  unskillful — upon  that 
great  mass  of  humanity  which,  from  the  whole  history  of  trade- 
unionism,  can  never  be  brought  under  class-organization — that 
the  chief  burden  of  unemployment  falls,  to  such  a  degree  of 
distress  as  to  constitute  it  our  real  menace.  For  the  degree 
of  unemployed  discontent  which  may  burst  forth  upon  us  at 
any  time  is  not  limited  to  the  highest  crest  of  the  past.  Each 
fresh  outburst  rises  to  a  greater  height  than  the  last.  This  is 
our  real  problem. 


624 


MODERN   ECONOMIC   TENDENCIES 


TABLE  68 
RELATIVE  UNEMPLOYMENT,  1890  AND  1900 


Class  or  Trade 

Percentage 
Unemployed 

Increase: 
Per  Cent 
of  1890 

1890 

1900 

CLASSES  OF  TRADES,  Both  Sexes  

15.1 
11.1 
31.4 
18.9 
22.8 
15.1 
7.9 

20.5 
6.6 
30.0 
11.6 
40.4 
16.3 
14.9 
25.4 
10.8 
14.5 
18.7 
13.4 
17.0 
13.2 
31.7 
43.6 
30.3 
43.0 
31.2 
42.9 
52.4 
20.3 
25.2 
31.0 
13.8 
15.0 
11.1 
13.5 
18.0 

22.3 
20.8 
42.2 
28.1 
27.2 
26.2 
10.5 

37.3 

7.6 
30.9 
15.3 
46.3 
18.4 
17.7 
28.1 
13.4 
25.9 
25.3 
22.0 
25.3 
19.6 
35.1 
48.4 
39.5 
55.5 
42.4 
56.1 
59.2 
24.8 
31.7 
38.0 
20.9 
20.9 
19.8 
25.9 
32.5 

47 
86 
34 
49 
19 
73 
33 

81 
15 
3 
32 
15 
13 
19 
11 
24 
78 
35 
64 
49 
48 
12 
11 
30 
29 
36 
31 
13 
22 
26 
23 
51 
39 
78 
92 
80 

Agricultural  Pursuits  

Building  Trades  

Domestic  and  Personal  

Manufacturing  and  Mechanical 

Professional  Service  

Trade  and  Transportation  

SINGLE  TRADES 
Agricultural  Laborers  

Farmers,  Planters  and  Overseers 

Lumbermen  

Stockmen  

Fishermen  and  Oystermen  

Boilermakers  

Engineers  and  Firemen  (stationary)  

Iron  and  Steel  Workers  

Machinists  

Tin  Plate  and  Ware  

Gold  and  Silver  Workers  

Plumbers,  Steam  and  Gas  Fitters  

Wire  Workers  

Brassworkers  

Saw  and  Planing  Mill  

Brick  and  Tile  Makers  

Stone  Cutters  

Masons  

Painters  and  Glaziers  

Plasterers  

Glass  Workers  (both  sexes)  

Leather  Workers  

Boot  and  Shoe  

Rubber  

Cabinet  Makers  

Upholsterers  

Dressmakers  

Milliners  

Seamstresses  

UNEMPLOYMENT 
TABLE  68— Continued 


625 


Class  or  Trade 

Percentage 
Unemployed 

Increase: 
Per  Cent 
of  1890 

1890 

1900 

SINGLE  TRADES  —  Continued 
Shirt  Collar  and  Cuff  Makers 

14.6 
10.1 
27.4 
9.7 
7.0 
8.9 

2.5 

4.2 

5.7 

5.1 
12.2 
28.8 
13.0 
10.5 
10.6 
33.4 
22.6 

2.4 
11.3 
30.8 
33.1 
9.6 

13.3 

47.9 
31.5 
29.9 
22.0 
25.2 
38.8 

23.7 
19.7 
29.3 
17.0 
14.8 
12.5 

5.3 
5.9 

8.8 

8.2 
19.7 
33.3 
15.8 
15.8 
14.7 
44.3 
44.1 

3.8 
20.7 
55.0 
61.2 
15.0 

12.9 
44.3 
20.3 
20.0 
19.5 
21.1 
17.1 

62 
95 
7 
74 
112 
40 

109 
42 

53 

61 
61 
15 
21 
50 
39 
33 
95 

58 
83 

78 
85 
56 

9 
7 
35 
33 
11 
16 
56 

Laundresses                           .          

Silk-mill  Workers  

Servants  Male 

Female                      

Bartenders        

Hotel,  Boarding-house,  Restaurant  and  Saloon- 
keepers (incl  House-keepers  in  1900) 

Agents,  Bankers,  Brokers,  Officials,  etc  

Commercial   Travelers,    Salesmen   and   Sales- 
women 

Bookkeepers,      Clerks,      Stenographers     and 
Accountants 

Messengers  and  Office  Boys  

Sailors  and  Boatmen  

Steam  Railroad  Employees 

Telegraph  and  Telephone  Linemen  
Hostlers  

Laborers  Male 

"         Female  .                        .    . 

Clergymen,  Lawyers,  Government  Officials  and 
Physicians 

Musicians  and  Music  Teachers           

Teachers  and  College  Professors,  Male  

"                     "              "          Female   . 

Printers,  Lithographers  and  Pressmen  

SINGLE    TRADES   SHOWING    DECREASE    IN   UN- 
EMPLOYMENT 
Gardeners  Florists  and  Nurserymen  

Miners  and  Quarrymen    

Hosiery  and  Knitting-mill  Males 

"                      "           "      Females  

Woolen-mill   Males 

"          "      Females                 

Glovemakers 

MODERN  ECONOMIC  TENDENCIES 


TABLE  69 

UNEMPLOYMENT  IN  TRADES  UNIONS,   NEW  YORK  STATE  AND  GREAT 

BRITAIN 


New  York  State  2 

Great  Britain 

Year 

Number  of  Members 

Per  Cent 

Approximate  Mem- 

in Unions,  per 

Idle  on 

bership  of  Unions 

Per  Cent 

Thousand  Popula- 

Day of 

Concerned 

Idle 

tion  of  State 

Report 

(Aggregate) 

1897 

20.9 

23.4 

1898 

25.6 

20.0 

1899 

27.3 

13.3 

1900 

31.7 

18.9 

530,000 

2^9 

1901 

33.3 

12.1 

545,000 

3.7 

1902 

39.0 

9.3 

550,000 

4.4 

1903 

46.2 

10.5 

555,000 

5.2 

1904 

46.8 

18.7 

570,000 

6.5 

1905 

45.6 

9.9 

580,000 

5.4 

1906 

45.4 

7.8 

595,000 

4.1 

1907 

47.6 

14.8 

630,000 

4.2 

1908 

43.0 

29.3 

650,000 

8.1 

1909 

40.0 

15.6 

695,000 

7.7 

1910 

46.7 

14.8 

700,000s 

4.8 

1911 

50.5 

15.6 



*  From  Bulletin  109,  Bureau  of  Labor  Statistics. 
1  First  seven  months. 

But  the  statistical  evidence  is  not  all  to  the  effect  that  general 
unemployment  is  increasing  continuously  at  exactly  the  rates 
indicated  in  Table  68.  In  Table  69  are  given  data  derived 
from  the  trades-unions  of  New  York  State  (as  representative 
of  several  individual  States  which  supply  data)  and  of  Great 
Britain.  The  growth  of  unemployment  from  year  to  year,  as 
revealed  by  Table  69,  is  not  a  regular  advance,  but  it  is  none 
the  less  a  general  and  unmistakable  one. 

Recent  History  of  Unemployment. — From  the  panic  of 
1907  (which  was  reflected  even  in  Great  Britain,  by  the  virtual 
doubling  in  1908  of  the  average  figure  for  the  preceding  eight 
years — a  jump  not  paralleled  in  this  country)  down  to  the 
war-stimulation  of  1915-16,  was  one  of  those  periods  of  virulence 


UNEMPLOYMENT 


627 


of  unemployment.  It  was  in  the  midst  of  this  period  that  the 
census  for  1910  occurred,  from  which  we  should  have  gotten 
so  much  light,  but  got  none. 

By  the  winter  of  1913-14  the  situation  had  gotten  very  bad, 
involving  riotous  demonstrations  upon  the  streets  of  New  York 
and  other  cities,  the  invasion  of  the  churches  with  demands 
for  work  and  shelter,  and  the  formal  installation  in  New  York 
of  the  "Hotel  de  Gink,"  to  provide  opportunity  for  self-help 
in  communal  house-keeping  by  the  homeless.  A  brief  review 
of  this  picturesque  year  in  American  economic  history,  as  culled 
from  the  headlines  of  the  conservative  daily  press,  follows  in 
itemized  form. 


1914.  January 

1914. 

1914. 

1914.  February 
1914. 

1914. 

1914.  March 

1914.       " 

1914.       " 


1914.  •• 

1914.  " 

1914.  " 

1914.  " 


10.  Six  Thousand  Applicants  for  Work  Mob  the  Ford 
Works  in  Detroit.     "Six  are  hired." 

29.  Mass-meeting  of  Unemployed  Women  at  Cooper 

Union. 

30.  Problem  of  Unemployment  discussed  in  the  Mayor's 

Reception-room,  City  Hall,  by  city  officials  and 

prominent  citizens,  and  the  Mayor  asked  to  appoint 

a  Permanent  Committee  on  Unemployment. 

9.  Seventy-five  Thousand  Out  of  Work  in  Philadelphia. 

12.  Counter-riot  at  Ford  Works,  to  warn  Unemployed 

away. 
17.  Five  Hundred  St.  Louis  Homeless  parade  to  City 

Hall  and  appeal  to  Mayor  for  Work. 
3.  Tannenbaum  and  his  "army"  propose  to  adopt  force 

in  seeking  work. 
5.  Tannenbaum  and   189  of  his  followers   (homeless 

unemployed)    arrested    in    the    Church    of    St. 

Alphonsius. 
9.  The  rector  of  the  Church  of  the  Ascension  and  the 

Vicar  of  St.   Luke's  entertain  over  a  hundred 

unemployed  for  supper,   lodging  and  breakfast. 

Other  ministers  meet  and  debate  the  problem  of 

unemployment . 
28.  Tannenbaum  is  sentenced  to  a  year  in  jail.     (Sheriff 

Kincaid,  of  Jersey  City,  commends  Tannenbaum, 

on  July  28,  1915,  as  being  a  man,  a  fighter  and  not 

a  liar.) 
17.  The  State  of  New  York  transports  sixty-eight  men 

and  five  women  "up-state"  free,  to  provide  work 

on  farms.     About  half  of  these  are  hired  by  the 

farmers. 
19.  Sacramento  Fire  Department  routs  Kelley's  Army 

of  1500  Hoboes  with  Fire-streams. 
22.  One  Thousand  Anarchists  march  up  Fifth  Avenue, 

New  York  City,  singing  the  "Marseillaise." 


628  MODERN   ECONOMIC   TENDENCIES 

1914.  "  20.  Three  hundred  I.  W.  W.  invade  a  Socialist  meeting 

on  Unemployment  at  Cooper  Union. 

1914.  "  28.  Pennsylvania  Railroad  drops  off  38,000  men  and  the 

New  York  Central  25,000. 

1914.       "  31.  Erie  Railroad  lays  off  more  than  18,000  men. 

1914.  June  5.  Five  hundred  thousand  employees  of  western  rail- 

roads reported  out  of  work. 

1914.  September  15.  Vienna  orders  her  police  to  prevent  street-parades 

of  the  Unemployed. 

1915.  January        1.  New  York  Mayor's  Committee  seeks  aid  from  the 

Bankers  for  loans  to  the  Unemployed. 
1915.         "  14.  Mayor  of  New  York  summons  the  heads  of  the 

Departments  and  demands  work  for  the  jobless. 

At  about  this  same  time  the  Department  of  Docks 

and  Ferries  drops  a  large  portion  of  its  men  from 

its  employ. 
1915.  9.  State  of  New  York  dismisses  four  hundred  men  from 

its  pay-roll. 
1915.         "  27.  Colonel  Theodore  Roosevelt  gives  $10,000  in  aid  of 

the  Unemployed. 

A  general  consensus  of  the  estimates  as  to  the  number  of 
unemployed  in  New  York  City  alone,  early  in  1914,  would 
range  from  about  two  to  five  hundred  thousand.  It  was  undis- 
puted that  the  bulk  of  these  were  men  having  families  and 
normally  maintaining  homes.  Many  were  respectable  women. 
There  were  many  individual  cases  of  actual  starvation  and 
suicide,  with  deaths  among  the  children  medically  reported  as 
due  to  malnutrition.  Yet  our  statistics  as  to  national  food- 
supply  show  no  slightest  sign  of  a  dearth  of  food  at  this  time. 

A  special  investigation  of  unemployment  in  New  York  City 
was  undertaken  by  the  federal  Bureau  of  Labor  Statistics,  aided 
by  the  police,  and  reported  in  Bulletin  172.  This  investigation 
(dated  January  thirtieth,  1915)  covered  104  representative  city- 
blocks  and  3705  individual  tenement-houses  and  dwellings  in 
addition.  At  about  the  same  time  the  Metropolitan  Life  In- 
surance Company,  through  its  interest  in  its  holders  of  in- 
dustrial policies,  conducted  an  investigation  of  those  residing 
in  New  York  City,  and  another  covering  northern  New  Jersey 
adjacent  to  the  city.  The  results  of  these  investigations  are 
reported  in  Table  70. 

Quoting  from  the  Bulletin: 

"In  addition  to  the  number  shown  in  the  above  statement 
there  was  known  to  be  considerable  unemployment  among  the 
class  designated  as  homeless — those  without  a  fixed  abode, 


UNEMPLOYMENT 


629 


who  slept  in  cheap  lodging-houses,  immigrant-homes,  lodging- 
house  shelters,  missions,  employment-agencies,  back-rooms  of 
saloons,  etc." 

TABLE  70 
UNEMPLOYMENT  IN  NEW  YORK  CITY  AND  VICINITY,  1915 


Federal 
Data 

Metropolitan  Life 

N.  Y. 
City 

Northern 
N.  J. 

No.  of  Persons  in  Families  enumerated  
No.  of  Wage-earners  in  Families  enumerated 
Per  Cent  Unemployed 

229,428 
95,443 
16.2 

252,912 

18 

97,026 
15 

A  census  taken  on  the  night  of  January  30,  1915,  found  269 
at  the  Farm  Colony  of  the  Department  of  Public  Charities 
(virtually  paupers)  and  628  at  the  Ellis  Island  immigrant- 
station — these  two  lots  being  outside  the  proper  limits  of  the 
normally  unemployed.  In  addition  there  were  found  1831  in 
the  Municipal  Lodging  House,  183  in  immigrant-homes,  19,486 
in  cheap  lodging-houses,  135  (including  17  women)  sleeping 
in  employment-agencies — a  travesty  upon  the  name — 1520  (in- 
cluding 130  women)  in  missions,  341  in  back-rooms  of  saloons, 
320  in  the  midnight  breadlines  and  23  on  the  thoroughfares, 
bridges,  docks,  parks,  etc.,  without  shelter,  including  one  woman 
in  each  of  the  last  three  lots. 

"It  was  impossible  to  ascertain  how  many  of  these  had 
any  employment,  but  it  was  safe  to  state  that  a  very  large 
proportion  of  these  persons  were  without  employment  of 
any  kind.  .  .  .  Information  as  to  the  length  of  time  out  of 
work  was  had  from  14,916  of  them,  as  follows: 


1  to  30  days 


1  to      7  days  

6.6  per  cent 

8  to    13     "    

4.4    "      " 

14  to    30     "    

12.0    "      " 

31  to    60     "    

20.6    "      " 

61  to    90     "    

16.5    "      " 

91  to  120     "    

12.9    "      " 

121  to  180    "    

15.3   "      " 

180  and  over  

..11.1    "      " 

23.0  per  cent 


630 


MODERN    ECONOMIC   TENDENCIES 


It  will  be  noted  that  the  largest  number  and  percentage  of 
persons  out  of  work,  both  male  and  female,  had  been  out  of 
work  from  31  to  60  days.  .  .  .  The  unemployment,  there- 
fore, began  to  be  most  acute  in  the  late  fall  or  early  winter, 
a  period  when  work  in  many  outside  industries  under  normal 
conditions  is  falling  off,  and  this  unemployment  was  undoubt- 
edly due  to  a  considerable  extent  to  the  usual  slack  season." 

The  data  connected  by  brackets  we  have  added  to  the  quota- 
tion. They  show  that,  if  one  compares  equal  periods  of  time, 
the  largest  percentage  of  unemployment  is  for  less  than  thirty 
days.  This  is  as  to  be  to  expected,  without  any  reference  to 
season  whatever. 

Here  crops  out  again  the  familiar  explanation  of  unemploy- 
ment as  being  due  to  season — one  of  those  lazy,  superficial 
guesses  which  form  the  stock  in  trade  of  the  average  person 
who  explains  glibly  other  people's  troubles.  But  in  another 
connection  this  same  bulletin  publishes  the  following  list  of 
percentages  of  unemployment  in  the  several  trades,  displayed 
in  Table  71.  If  there  be  anything  in  the  season-doctrine  a 
comparison  of  the  different  trades,  which  are  affected  so  differ- 
ently by  seasons,  should  certainly  show  it. 

TABLE  71 

UNEMPLOYMENT  AND  SEASONABLE  TRADES,  1915 
Percentage  of  Unemployment  in 


I.  Trades  Repressed  by  Winter 
Weather 


II.  Those  not  so 


Five  Building  Trades 32% 

Chauffeurs 28 

Laborers 34 

Marble  and  Stone  Cutters. . .  47 

Average  of  this  Group. . .  35% 


Average  of  All  Trades....  25 


Bakers 16% 

Bartenders 14 

Cigars  and  Tobacco 16 

Cooks 18 

Dressmakers 20 

Elevator-tenders 21 

Longshoremen  and  stevedores  16 

Machinists 13 

Stenographers,  etc 7 

Waiters  and  Waitresses . .       .  17 


Average  of  Group  II. 


16% 


UNEMPLOYMENT  631 

In  Table  71  this  list  of  trades  is  segregated  into  two  groups. 
One  of  these  groups  is  subject  to  repression  of  activity  by  winter 
weather;  the  other  is  not  so.  A  comparison  of  these  groups 
shows  that  season  does  exert  its  effect  upon  employment,  but 
only  to  the  extent  of  explaining  about  half  of  the  unemploy- 
ment in  those  trades  which  feel  the  winter,  and  these  trades 
are  but  a  minor  factor  of  the  whole.  In  other  words,  a  census 
of  unemployment  taken  in  the  winter  showed  that,  among 
those  trades  affected  by  winter,  54  per  cent  might  be  attributed 
to  the  weather,  because  the  remaining  46  per  cent  just  paralleled 
the  unemployment  prevailing  in  indoor  trades. 

Since  unemployment  is  a  varying  phenomenon  anyhow,  based 
upon  an  average  degree  of  commercialism,  this  leaves  the 
average  of  winter  and  summer  unemployment  73  per  cent  of 
the  maximum  for  winter  in  those  trades  which  feel  winter. 
In  general,  then,  only  about  one-quarter  of  all  unemployment 
may  be  attributed  to  season.  The  other  three-quarters  consti- 
tutes our  remediable  problem  in  social  reorganization. 

A  Continual  Deficit  in  Employment  Indubitable. — Review- 
ing all  these  statistics  broadly,  it  becomes  unquestionable  that 
there  normally  exists  a  perceptible  fraction,  to  be  roughly 
estimated  at  from  one-tenth  to  one-fifth,  of  all  working-people 
who  cannot  find  employment  at  all  during  an  appreciable  frac- 
tion of  the  time.  There  also  seems  to  be  evidence  (although 
not  fit  for  statistical  presentation)  that  it  is  the  relative  frac- 
tion of  idle  time,  rather  than  the  relative  number  of  people 
totally  unemployed,  which  is  on  the  increase.  But  between  these 
two  sorts  of  enforced  idleness  it  is  hard  to  distinguish  ac- 
curately. Certainly  the  qualitative  deficit  in  employment  is 
increasing. 

False  Explanations  of  Unemployment. — A  glance  over 
Table  68  will  show  that  there  is  little  indication  of  any  general 
rule  guiding  unemployment.  There  is  certainly  to  be  found 
in  it  no  justification  for  many  of  the  explanations  which  have 
been  offered,  of  which  the  following  are  familiar  instances: 

(1)  Seasonal  Trades. — Thus,  those  occupations  which  show 
the  highest  absolute  rates  of  unemployment  happen  to  com- 
prise the  building-trades ;  yet  we  may  not  jump  from  that  fact 
to  the  conclusion  that  it  is  because  of  season,  or  because  of 
outdoor  work,  that  they  are  idle;  for  the  highest  rate  of  idle- 
ness of  all  is  exhibited  by  the  teachers,  who  work  indoors  and 


632  MODERN  ECONOMIC   TENDENCIES 

are  engaged  by  the  year,  with  a  close   second  in  the  glass- 
workers,  who  also  work  indoors. 

(2)  Incompetence. — It    cannot   be    ignorance    which    begets 
unemployment,  because  it  is  the  teachers  and  the  college-pro- 
fessors who  incur  the  highest  rate  of  unemployment  of  all.    On 
the  other  hand,  it  cannot  be  their  over-specialization  which 
explains  their  idleness,  because  it  is  the  unskilled  laborers — the 
class  which  can  and  does  flow  most  readily  from  industry  to 
industry,   without   regard    to    its   technique — who    follow    the 
teachers  closely  in  their  high  percentage  of  unemployment. 

(3)  Domestic  Service. — Then  the  domestic  servants,  which 
every  housewife  will  tell  you  are   increasingly  hard   to   get, 
show  the  most  rapid  increase  in  unemployment  of  any,  although 
not   a  high   absolute  percentage.     In   short,   the   person   who 
starts  out  with  the  idea  that  unemployment  exists  only  where 
the  employers  are  surfeited  with  help,  or  that  it  has  any  direct 
and  simple  connection  with   any  obvious,  natural  or  human 
sentiment,  is  destined  to  a  baffling  disappointment  by  the  facts 
— until  he  accepts  the  views  as  to  the  complex  source  of  un- 
employment, in  general  commercialism,  set  forth  in  this  book. 

Natural  Gravitation  in  Unemployment. — Two  features  of 
Table  68,  however,  are  well  worthy  of  mention.  First,  it  is 
those  trades  wherein  unemployment  is  least  which  show  the 
most  rapid  rate  of  increase  in  unemployment,  and  vice  versa. 
This  shows  that  unemployment  tends  to  distribute  itself  as 
evenly  as  possible,  in  a  roughly  stable  but  fluid  equilibrium. 
In  short,  unemployment  is  a  purely  mechanical  and  fluid,  and 
not  at  all  a  psychic,  phenomenon. 

Secondly,  unemployment  is  greatest  in  the  productive  trades 
and  least  in  those  lines  of  activity  which  are  more  or  less  closely 
associated  with  commercialism — agents,  brokers,  commercial 
travelers,  salesmen  and  saleswomen,  book-keepers,  clerks, 
stenographers,  printers  and  lithographers.  Yet  the  statistics 
in  this  book  go  to  show  that  all  of  these  latter  occupations 
have  been  growing  much  more  rapidly  than  have  the  productive 
trades.  In  fact,  the  productive  trades  have  been  decreasing. 

Surplus  Labor. — This  last  fact  is  of  the  greatest  signifi- 
cance in  explaining,  at  least,  what  is  not  the  cause  of  employ- 
ment, namely,  over-plentifulness  of  labor.  For  if  plentiful- 
ness  of  labor,  or  the  lack  of  it,  had  anything  to  do  with  the 
degree  of  unemployment  or  its  opposite — if  there  were  any 


UNEMPLOYMENT  633 

foundation  whatever  for  that  most  persistent  of  all  popular 
superstitions,  namely,  that  unemployment  signifies  the  presence 
of  too  much  labor — then  this  situation  must  have  been  exactly 
reversed. 

That  is  to  say,  those  occupations  which  have  been  steadily 
losing  workers — the  productive  ones — would  exhibit  the  least 
unemployment,  because  their  "surplus"  labor  would  have  de- 
parted. Those  occupations  which  have  been  steadily  receiving 
accessions  for  decades — the  commercial  ones — would  show  the 
most  unemployment,  or  symptoms  of  "surplus"  labor.  Yet 
the  truth  is  the  exact  reverse  of  this! 

Cause  and  Effect  in  Unemployment. — This  proves  that 
unemployment  is  the  cause,  rather  than  the  effect,  of  any  local 
surplus  of  labor.  Unemployment,  arising  from  sources  which 
are  quite  apart  from  any  question  of  quantity  of  labor  offered, 
or  of  psychology  within  the  laborer,  drives  labor  away  in  fright. 

The  unemployment  comes  first.  The  surplus  of  labor  then 
arises,  as  a  result. 

This  surplus  finally  becomes  sufficiently  menacing  to  drive 
labor  away.  But  a  result  cannot  transcend  its  cause.  The  sur- 
plus of  labor  cannot  exceed  the  deficit  in  employment.  Unem- 
ployment cannot  frighten  labor  away  so  fast  that  full  demand 
replaces  it;  for  as  soon  as  the  departure  of  the  first  labor  has 
reduced  somewhat  the  unusual  degree  of  unemployment,  then 
the  fright  and  the  flight  will  be  allayed  together. 

In  short,  labor  does  not  like  to  move,  any  more  than  any 
other  known  thing.  It  possesses  inertia.  There  is  no  more 
chance  of  any  mere  whim  simultaneously  animating  large  bodies 
of  labor  into  inexplicable  migration,  so  as~~4o  leave  a  dearth 
of  labor  and  a  minimum  of  unemployment  behind  them,  than 
there  is  of  a  cold  locomotive's  suddenly  conceiving  the  desire 
and  the  power  to  move  off  down  the  track. 

The  True  Nature  of  " Surplus  Labor."— The  facts  are  these. 
Commercialism,  having  first  produced  artificially  a  general 
deficit  in  hiring-power  in  all  occupations,  then  distributes  it 
still  more  artificially,  so  that  there  is  a  constantly  growing 
demand  for  effort  along  commercial  lines,  and  a  decreasing 
one  along  productive  lines. 

But  labor  does  not  enjoy  responding  to  this  bait.  That  love 
of  craft  which  is  deep-seated  in  every  wholesome  soul,  and  the 
subconscious  preference  of  the  human  instinct  for  that  which 


634  MODERN   ECONOMIC   TENDENCIES 

is  productive,  helpful  and  sincere,  over  the  insincere,  combative 
callings  of  the  commercial  world,  puts  a  tight  brake  upon  this 
migration  out  of  productive  and  into  commercial  walks  of  life. 

Hence  labor  clings  to  its  craft  until  the  growing  menace 
of  unemployment,  if  one  remains,  becomes  too  frightful.  Then 
it  departs  with  regret;  but  so  slowly  as  to  leave  always  behind 
it  a  major  percentage  of  unemployment,  as  the  deterrent  warn- 
ing the  next  reluctant  laggard  to  hasten  his  abandonment  of 
his  art. 

Conversely,  the  deficit  in  employment  prevailing  in  com- 
mercial fields  must  be  less  than  that  prevalent  elsewhere,  before 
it  can  attract  labor  into  its  less  humanly  attractive,  if  more 
lucrative,  occupations. 

Labor  is  plentiful  here  or  lacking  there,  not  according  to  its 
whim,  but  according  as  the  volume  of  employment  offered 
attracts  it  one  way  or  another.  But  it  migrates  with  difficulty, 
experiencing  resistance  from  the  psychic  inertia  of  man,  and 
from  labor's  wholesome  love  of  its  craft.  Hence  a  surfeit  or 
dearth  of  labor  appears  in  spots,  as  the  push  from  behind  or 
the  pull  from  in  front  respectively — so  to  speak — needed  to 
propel  the  migration.  A  relatively  greater  local  degree  of  un- 
employment signifies  a  plus  economic  pressure,  forcing  labor 
out,  while  a  point  of  relatively  less  unemployment  is  a  low 
economic  barometer,  drawing  labor  in. 

But  the  pressure  comes  first,  in  the  form  of  unemployment. 
The  migration  follows  as  a  result.  The  laborer  is  a  pure  pup- 
pet, impotent  to  create  or  destroy,  when  employment  or  un- 
employment is  involved. 

This  situation  is  the  exact  opposite  of  the  popular  concept 
of  unemployment,  even  among  the  educated.  For  the  latter 
regards  points  of  greater  unemployment  as  those  toward  which 
labor,  impelled  by  some  unexplained  mysterious  impulse  to  do 
what  is  wrong,  is  flocking — in  an  abnormal  and  reprehensible 
whim  which  only  needs  benevolent  correction  by  word,  from 
the  superior  reason  of  others  who  do  not  have  to  earn  their 
living.  Conversely,  points  of  less  unemployment  this  concept 
regards  as  those  whence  labor  has  perversely  and  exasperatingly 
departed,  in  equally  reprehensible  whim. 

Yet  exactly  the  opposite  is  the  truth.  It  is  labor  which, 
responding  more  to  the  idealistic  love  of  craft  and  less  to  those 
sordid  considerations  which  are  supreme  in  the  commercial 


UNEMPLOYMENT  635 

world,  moves  actually  in  the  direction  relentlessly  impelled  by 
society's  awards  of  job  and  pay ;  yet  ever  tries,  with  an  instinct 
which  is  unerring  in  its  accuracy,  although  in  vain,  to  stay 
by  its  craft  and  do  its  best  for  society. 

If  this  were  not  so,  if  labor  were  not  attempting  to  stand 
by,  at  its  post,  with  the  fidelity  which  should  earn  monuments, 
then  we  should  find  the  statistics  recording  the  least  unem- 
ployment in  the  productive  trades,  whence  all  surplus  labor  had 
fled  in  search  of  the  golden  fleece;  while  in  the  commercial 
world  we  should  find  the  maximum  unemployment,  due  to 
man's  greater  worship  of  mammon  than  of  art.  But  the  truth 
is  the  exact  opposite  from  this. 

Automatic  Involuntariness  Again. — In  its  broadest  aspect, 
this  fact,  when  once  understood,  corroborates  our  conclusions 
from  every  other  economic  paradox  which  has  been  analyzed 
herein.  This  is  to  the  effect  that  the  forces  which  are  driving 
and  guiding  humanity  along  those  lines  of  social  evolution 
which  are  now  molding  civilization  into  the  modern  social 
problem,  are  all  of  them  institutional  and  none  of  them  psychic 
in  character.  That  is  to  say,  man's  individual  psychology  acts 
merely  as  the  inert  clay  in  the  potter's  hands,  determining 
by  its  plastic  nature  what  may  or  may  not  be  molded,  but 
supplying  in  itself  no  motive  force  whatever. 

The  origin  of  these  forces  is  largely  human,  of  course;  but 
the  time,  place  and  manner  of  their  origination  is  remotely  dis- 
tant from  their  effects.  The  transformations  of  energy  occur- 
ring between  the  coal-mine,  as  an  origin,  and  the  swiftly  moving 
train,  the  brilliance  of  electric  illumination  or  the  silent  power 
of  the  wireless  over  storm,  darkness  and  distance,  as  results, 
are  no  more  intricate,  and  not  nearly  so  difficult  to  trace,  as  are 
those  intermediate  between  the  apparently  innocent  commercial 
acts  which  beget  unemployment  and  the  social  and  ethical  re- 
sults which  they  entail. 

To  the  overwhelming  power  of  these  gigantic  institutional 
motive  forces  the  psychic  instincts  of  microscopic  man  offer 
every  resistance  within  their  power — and  always  in  the  most 
wholesome  direction.  But  in  vain.  The  icicle  might  as  well 
defy  the  April  sun  as  mankind  try  to  defy  the  softening,  de- 
grading temptations  offered  by  commercialism.  There  is  only 
one  thing  to  be  done  against  commercialism,  and  that  is  to 
abolish  it  in  entirety. 


636  MODERN   ECONOMIC   TENDENCIES 

Unemployment  even  in  the  Commercial  World. — Yet  even 
in  commercial  ranks  there  is  some  unemployment.  The  drift 
of  population  from  production  to  commercialism,  while  below 
proportionality  to  the  inducement,  is  yet  great  enough  to  show 
the  surplus  over  demand  which  permeates  all  classes  of  economic 
society.  "Under  commercialism,  no  degree  of  demand  and  no 
rate  of  pay — not  even  its  own — can  be  high  enough  to  annul 
all  unemployment  and  attract  in  any  given  direction  its  full 
quota  of  labor,  and  no  more. 

Each  increment  in  wage-demand  for  labor  brings  with  it  its 
increased  deficit  in  the  hiring-power  of  the  Consumer's  dollar, 
and  this  is  then  distributed  fluidly  throughout  society.  There- 
fore it  is  merely  the  relative  distribution  of  an  always  ubiquitous 
unemployment  which  statistics  can  record. 

Like  every  other  attribute  of  commercialism,  unemployment 
varies  tremendously,  now  forcing  itself  upon  public  attention 
by  its  momentary  virulence  and  again  letting  itself  be  for- 
gotten. In  picturing  what  we  are  to  gain  by  the  abolition  of 
commercialism,  one  of  the  most  important  features  to  be 
imagined  is  that  regularity  and  continuity  of  economic  affairs 
which  is  now  undreamed,  amidst  the  constant  turbulence  stirred 
up  artificially  by  commercialism. 

Inanimate  Unemployment. — Then  our  investigation  of  un- 
employment, which  has  been  relatively  complete  in  regard  to 
persons,  has  taken  no  account  whatever  of  that  huge,  but  sec- 
ondary, burden  of  unemployment — the  enforced  idleness  of 
lands,  materials  and  appliances.  Nor  is  there  space  here  for 
more  than  mention  of  the  topic. 

The  idleness  of  valuable  land  is  the  foundation  upon  which 
the  Single  Taxers  build  their  philosophies.  Everywhere  it  is 
obvious.  Everywhere  it  is  a  grievous  burden.  But  after  what 
has  preceded  here,  it  seems  needless  to  state  that  it  constitutes 
but  one  minor  fraction  of  a  very  much  larger  single  problem — 
that  of  a  general  unemployment  of  all  aspects  of  social  life,  due 
to  commercialism. 

In  our  cities  the  vacant  lots  and  half-employed  sites  con- 
stitute a  flagrant  waste  of  opportunity  and  a  senseless  burden 
upon  our  transit-systems  (which  must  carry  people  past  these 
wasted  territories  in  order  to  land  them  at  work  or  residence, 
already  too  widely  separated).  They  are  an  eye-sore  upon  our 
civic  dignity  and  beauty.  In  the  country  the  vast  areas  of 


UNEMPLOYMENT  637 

waste  land  to  be  seen  within  a  few  miles'  radius  of  every 
large  city  stand  as  a  puzzle  to  every  economist — until  he  dares 
to  grasp  the  nettly  nature  of  commercialism. 

As  to  appliances,  on  every  hand  one  sees  idle  factories,  idle 
sheds  and  idle  wharves,  rotting  away  in  contact  with  an  over- 
pressure to  find  opportunities  and  means  to  work.  Peren- 
nially economists  and  commercialists  complain  of  "overpro- 
duction," and  shut  down  a  factory  here  and  there  to  keep  prices 
up  to  the  profitable  point.  So  common  is  this  practice  that  we 
might  establish,  if  we  had  the  time,  some  fairly  definite  per- 
centage of  all  tools  and  buildings  idle  in  every  line  of  work — 
necessarily  idle  in  order  to  maintain  economic  equilibrium — 
under  commercialism.3 

Then  there  is  the  huge  waste  of  materials,  current  everywhere, 
but  chiefly  in  our  big  cities,  due  to  the  impossibility  of  utilizing 
a  fair  percentage  of  all  by-product  stuffs,  while  having  to  incur 
the  commercial  costs  of  doing  so.  Our  sewers  are  sludgy  and 
our  harbors  hideously  slimy  with  material  which  is  undesirable 
only  because  developed  in  the  hands  of  separately  owned  con- 
cerns devoted  to  the  making  of  profits  in  other  lines. 

This  material  is  either  too  scattered  in  its  source,  or  too 
bulky  or  dilute  in  form,  or  is  adapted  to  feed  other  industries 
too  remote  in  character  or  locality,  to  pay  anyone  to  save, 
collect,  sort,  transport  and  transform  it  into  something  useful, 
while  having  to  pay  interest-charges  upon  all  the  appliances 
involved  and  the  costs  of  commercial  competition  with  other 
sources  of  the  same  things.  So  all  this  is  thrown  to  waste. 

Yet,  given  a  factory-system  organization  of  all  industry,  and 
the  cost  of  utilizing  this  scrap  would  be  repaid  many  times 
over.  Our  chemists  and  engineers  stand  ready  to  perform  all 
manner  of  marvels  in  the  production  of  wealth  from  dross,  or 
in  beautifying  what  is  now  ugly,  if  only  the  commercial  bars 
to  their  doing  so  might  be  let  down. 

Then  the  gain  to  our  cities  in  an  esthetic  sense,  if  not  also 

3An  investigation  conducted  by  the  New  York  Times  and  reported 
in  its  issue  for  January  15,  1914,  corroborated  a  statement  previously 
made  by  Congressman  Humphreys  to  the  effect  that  ' '  123  pig-iron 
stacks,  with  an  annual  capacity  of  nearly  13,000,000  tons,  had  been 
blown  out  since  March  1st. ' '  Then  all  possibility  of  useful  deduction 
from  this  information  is  killed  by  an  entrance  into  debate  whether  it 
were  the  Republican  or  the  Democratic  administration  which  was  respon- 
sible for  this  situation! 


638  MODERN  ECONOMIC  TENDENCIES 

in  hygiene,  would  be  great  if  this  might  be  done.  It  is  true 
that  our  city-governments  now  dispose  of  some  offal,  and  render 
it  to  a  degree  into  something  useful,  wherever  its  character  is 
BO  offensive  or  dangerous  to  life  that  the  demand  for  this  work 
is  imperative.  But  the  interests  of  commercialism  set  all  the 
machinery  of  politics  into  operation  to  prevent  the  city's  pro- 
ceeding further  in  this  direction  than  is  absolutely  necessary, 
else  the  government  would  be  found  to  be  in  competition  with 
private — that  is,  profit-making — sources  of  supply  of  the  things 
which  might  be  developed.  So  our  cities  remain  polluted  with 
all  manner  of  minor  nuisances — to  a  degree  which  we  shall 
soon  regard,  as  we  look  back  upon  it,  as  medieval  in  character. 

Economic  Paradoxes  again. — The  one  point  to  be  empha- 
sized repeatedly  is  that,  until  one  accepts  the  concept  of  com- 
mercialism as  a  convulsing  social  poison,  rather  than  a  food — 
as  a  disease  which  leaves  its  victim  as  contorted  as  does  spinal 
meningitis — every  aspect  of  our  economic  interactions  will  be 
found  to  develop  paradoxes.  Vacant  lots  will  be  found  alter- 
nating with  undesirably  congested  ones;  modern  skyscrapers 
will  jostle  old-fashioned  three-story  frames;  coal-mines  will 
remain  undeveloped  while  cities  are  paralyzed  by  cold;  tools 
will  rust  idly  beside  factories  which  cannot  fill  their  orders; 
ships  will  waste  their  invaluable  time  in  swinging  at  anchor, 
for  lack  of  berths,  in  ports  where  wharves  rot  idly;  prices  will 
rise  while  supplies  increase;  the  poor  will  live  in  hardship 
and  die  of  want  while  the  rich  cannot  hire  help;  and  working- 
people  will  continue  dazed  between  the  finding  one  week  that 
no  one  wishes  their  services,  while  on  the  next  their  effort  must 
be  maintained  throughout  a  working-day  far  beyond  their 
natural  strength,  else  something  dire  will  happen.  These  and 
a  thousand  similar  paradoxes  which  confront  us  at  every  turn 
in  our  present-day  world,  and  which  stand  to  the  average  mind 
as  proof  that  the  other  fellow  is  a  perverse,  greedy  or  malicious 
fool,  may  succeed  sometime  in  persuading  the  thinking  person 
that  there  are  other  and  far  more  powerful  forces  at  work, 
within  our  social  reactions,  than  any  mere  psychology  of  the 
human  individual. 

The  philosophy  so  popular  to-day,  which  assumes  to  explain 
all  evils  and  to  prescribe  all  remedies  as  lying  within  the  in- 
dividual psychology,  is  misleading  us  into  one  of  the  most 
gross  and  cruel  blunders  of  history.  If  history  but  repeats  itself, 


UNEMPLOYMENT  639 

this  silly  superstition  is  due  to  cost  this  country  alone,  through 
anarchy,  famine  and  pestilence,  ten  millions  of  lives,  before 
every  American  has  left  behind  him,  never  to  be  lifted  again, 
the  unpatriotic  delusion  that,  in  his  economic  acts,  he  is  a  free 
agent  and  a  private  citizen,  and  that  whatever  may  prove  to 
be  wrong  must  be  due  to  somebody  else's  wickedness  or 
incompetence. 

Intellectual  Responsibility  and  Patriotism. — It  is  usually 
true  that  only  gentleness  of  speech  begets  a  following.  Pursu- 
ing this  idea,  this  book  has  everywhere  stood  for  the  indictment 
of  a  wrong  system,  rather  than  the  upbraiding  of  erring  in- 
dividuals. But  if  there  were  ever  a  place  wherein  this  rule 
excusably  may  be  broken,  where  stern  rebuke  is  justified,  it  is 
when  confronted  with  that  combination  of  laziness  of  mind 
with  recklessness  of  fact  and  moral  irresponsibility,  which  is 
expressed  in  the  remark  that  "all  who  wish  work  can  get  it." 

For  there  is  at  present  no  menace  to  the  stability  of  our 
government  and  our  civilization  to  equal  that  which  is  potential 
in  forced  unemployment — and  these  words  are  written  in  the 
depths  of  the  Great  War,  by  one  who  from  its  first  week  has 
said  that  the  world  must  unite  to  crush  out  its  cause.  There 
is  no  such  a  breeder  of  degradation,  bitterness,  anarchy, 
atheism  and  all  manner  of  violent  philosophies,  as  well  as  of 
simple  laziness,  equal  to  enforced  idleness  or  partial  unemploy- 
ment. Its  most  innocent  fruit,  indeed,  is  sheer  laziness.4 

There  is  no  other  feature  of  social  life  which  so  fully  ex- 
plains so  many  undesirable  incidents.  Congestion  in  cities, 
graft  in  public  offices,  white  slavery  conducted  by  the  men  and 
prostitution  by  the  women,  gambling  among  both  sexes,  and 
squalor,  display,  pretense  and  insincerity  everywhere — all  are 

*It  is  since  theee  words  were  written  that  the  world  has  been  in- 
troduced to  the  word  and  the  fact  of  Bolshevism.  Bolshevism  will 
never  be  brought  under  permanent  control  until  it  is  understood,  not 
as  an  insane  whim,  but  as  a  natural  phenomenon,  an  incident  to  world- 
commercialism.  Bolshevism,  while  it  exaggerates  unemployment,  is 
itself  a  fruit  of  forced  unemployment  and  under-purchasing-power — 
of  these  things  united  with  that  socialistic  philosophy  which,  lacking 
the  ideas  set  forth  in  this  book,  forms  the  only  nominally  adequate 
reply  to  commercialism  which  is  now  available  to  the  people.  The 
error  of  this  philosophy  is  debated  herein  in  Chapter  XXIV;  but  proving 
its  error  will  not  alter  its  attractiveness  to  the  masses.  Only  the  sub- 
stitution of  a  more  correct  and  humane,  but  competent,  reply  to  com- 
mercialism can  do  that.  This,  too,  is  supplied  later  in  this  book. 


640  MODERN   ECONOMIC   TENDENCIES 

explicable  as  the  acts  of  those  who  would  naturally  turn  to 
more  wholesome  walks  in  life,  were  it  not  that  society  condemns 
them  to  partial  idleness  and  relative  poverty  if  they  do  so. 

The  person  who  lightly  asserts,  without  having  investigated 
carefully,  that  unemployment  is  always  voluntary,  is  not  only 
guilty  of  a  lazy  untruth,  but  also  of  sheer  treason  to  the  state. 
He  is  inexcusably  more  lazy  than  he  who  seeks  work  without 
finding  it.  He  is  more  a  traitor  to  the  stability  of  our  govern- 
ment and  liberties  than  is  any  "slacker." 

Unemployment  not  due  to  Surplus  Labor,  nor  to  Labor- 
Saving  Machines. — Only  less  guilty  than  these,  and  in  the  same 
intellectual  class,  are  those  who  attempt  to  raise  wages  by  the 
exclusion  of  additional  labor,  or  of  labor-saving  machines,  from 
rivalry  with  the  labor  already  on  hand.  Such  is  often  the  nar- 
row-minded policy  of  the  labor-union  movement,  which  has 
always  sought  to  restrict  apprenticeships,  which  has  vehemently 
opposed  the  admission  of  oriental  competition  with  American 
labor  on  the  Pacific  Coast,  and  which  has  finally  secured  the 
passage  of  a  most  unjust  and  short-sighted  illiteracy-test  for 
all  immigrants.  A  latest  instance  of  this  blind  policy  is  the 
race-riot  of  East  St.  Louis,  in  which  many  lives  were  lost  in  an 
effort  to  exclude  negro  laborers  who  had  migrated  thither  from 
the  South.  Each  month  brings  some  sample  of  such  news. 

Ever  since  the  rivermen  of  Cassel,  Germany,  destroyed 
Papin's  first  steamboat,  in  1707,  in  fear  that  it  would  ruin 
their  business,  down  to  the  present  time,  when  hundreds  of 
thousands  of  watermen  are  finding  employment  in  steam-navi- 
gation to  one  so  employed  in  1707,  labor  has  always  been 
violently  jealous  of  additional  incoming  labor,  or  of  labor- 
saving  machinery.  And  every  time  the  sentiment  has  been 
due  not  to  any  natural  harm  coming  from  the  additional  labor, 
but  to  the  artificial  deficit  in  employment — created  by  com- 
mercialism, and  not  dependent  at  all  upon  the  quantity  of  labor 
in  the  market — which  the  untutored  workingman  assumed  would 
be  accentuated  by  any  increment  in  the  supply  of  labor. 

For  every  fact  of  history  emphasizes  the  increasing  advan- 
tages always  enjoyed  by  labor,  in  the  way  of  less  idleness  and 
a  higher  purchasing-power  (if  a  lower  figure)  of  wages,  re- 
sultant from  every  increase  in  the  amount  of  labor  offered  in 
market,  or  from  each  new  labor-saving  machine.  Prosperity 
grows  with  population.  The  state  should  offer  a  bounty  for  each 


UNEMPLOYMENT  641 

new  birth.  Boards  of  trade  do  now  offer  bonuses  to  attract 
population  to  their  towns.  The  buildings  of  the  Immigration 
Bureau,  at  Ellis  Island,  New  York  Harbor,  should  be  labeled 
"Welcome!"  in  every  language  known  to  the  high  seas. 

Modern  Rights  of  Man. — So  there  direly  needs  to  be  a 
fresh  statement  and  demand  of  the  Eights  of  Man.  'As  abso- 
lute pre-essentials  to  a  normal,  happy  and  useful  life,  under 
modern  conditions,  these  things  must  be  assured  to  each  citizen 
by  the  state : 

(1)  Full  market-demand  for  the  exertion  of  whatever  capa- 
bilities each  may  possess,  with  the  Ultimate  Consumer  sancti- 
fied with  authority  as  sole  arbiter  of  the  value  of  those  capa- 
bilities. 

(2)  Certainty  of  continuous  employment.     No  workman 
may  be  discharged  from  work.    He  may  be  shifted  from  one 
job  to  another,  as  his  peculiarities  may  demand;  but  none 
of  these  shifts  may  be  regarded  as  leaving  him  without  a  job 
and  without  pay;  and  this  presupposes,  of  course,  that  his 
pay  does  not  come  out  of  the  pocket  of  a  private  employer. 
His  employer,  instead  of  being  an  owner,  must  himself  be 
on  the  same  basis  of  pay  (though  not  at  the  same  rate)  as 
the  man. 

(3)  Reward  for  his  exertion  with  the  full  value  of  the 
result  to  the  Ultimate  Consumer,  instead  of  after  the  deduc- 
tion of  all  sorts  of  costs  for  activities  which  the  Consumer  does 
not  desire. 

(4)  Certainty,  granting  the  most  ordinary  industry  and 
thrift,  of  provision  for  old  age. 

(5)  Stimulation  (for  the  first  time  in  history)  by  the  free 
and  wholesome   emulation  of  his  fellows.     For  commercial 
competition  is  the  exact  opposite  of  this.     It  represses  where 
emulation  stimulates. 

It  cannot  be  too  emphatically  stated,  however,  that  none  of 
these  rights  is  attainable  by  direct  legislation.  The  whole 
history  of  public  works  instituted  in  order  to  give  employment, 
for  instance,  has  been  a  failure.  They  have  not  only  created 
social  instability  in  other  directions,  but  they  have  quite  failed 
to  diminish  unemployment.  This  result  is  quite  in  accord 
with  the  preceding  analysis  of  cause  and  effect. 

Nor  can  any  legislation  aimed  directly  at  the  maintenance 
of  wages,  nor  at  a  minimum  wage,  nor  at  the  suppression  of 
profits,  nor  at  the  taxing  of  incomes,  be  successful  toward  the 


642  MODERN   ECONOMIC   TENDENCIES 

attainment  of  any  of  these  Rights  of  Man.  The  records  are 
strewn  with  instances  of  failure  in  this  direction. 

But,  on  the  other  hand,  all  of  these  rights  will  be  assured  to 
each  citizen  automatically,  without  enforcement  by  law,  just 
as  soon  as  ownership-in-industry  has  been  completely  abolished 
— not  in  some  tentative,  local,  microscopic  way,  at  a  rate  lag- 
ging far  behind  the  rate  of  growth  of  commercialism  itself — 
but  completely  and  effectively. 

That  any  such  a  program  involves  questions  of  procedure  of 
the  most  gigantic  sort  it  is  not  sought  here  to  conceal.  But 
the  first  step  toward  economic  freedom  is  to  recognize  the  fact 
just  stated — that  in  no  other  direction,  nor  by  any  lesser  degree 
of  reform,  can  liberty  be  attained.  Also,  that  sentiments  are  im- 
potent against  institutions. 

Technique  of  the  Energetics  of  Unemployment.— Before 
finally  leaving  this  topic  of  labor  and  employment  a  word  should 
be  addressed  to  those  who  may  be  professionally  interested  in 
the  more  technical  theories  of  political  economy.  For  it  may 
appear  to  such  a  reader  that  the  doctrine  stated  above  as  to 
unemployment  constitutes  a  reversion  to  the  old  and  discredited 
"wage-fund"  theory  of  employment. 

It  does  not,  however.  The  wage-fund,  as  a  concrete  sum  of 
money  available  for  hiring  labor,  has  properly  been  discredited. 
But,  on  the  other  hand,  the  view  of  employment  as  dependent 
upon  a  definite  current  of  economic  energy,  amounting  to  some 
determinable  percentage  of  the  total  energy  currently  put  forth 
(of  which  energy  money  may  or  may  not  be  in  a  fair  measure), 
is  merely  bringing  economic  science  into  line  with  the  modern 
aspect  of  all  other  energetic  sciences. 

For  when  we  recognize  the  volume  of  employment  as  pro- 
duced by  the  co-operative  energies  of  the  productive  Consumer, 
as  restricted  or  dissipated  by  the  combative  energies  of  the 
commercial  Consumer,  and  as  expanded  or  contracted  from 
day  to  day  by  the  expansion  or  contraction  of  the  volume  of 
popular  credit,  acting  as  an  economic  catalytic,  then  we  are 
merely  recognizing  social  energetics  as  one  branch  of  the  parent 
science  of  cosmic  energetics.  We  are  assuming  merely  that 
employment  is  a  phenomenon  guided  and  controlled  primarily 
by  those  basic  principles  which  prevail  in  all  the  energetic 
sciences,  namely,  conservation,  dissipation,  cyclical  transforma- 
tion, etc. 


UNEMPLOYMENT  643 

It  is  therefore  proper  to  note,  as  a  parallel  instance  of  this, 
that  recent  progress  in  the  science  of  thermodynamics,  into  a 
better  recognition  of  its  unity  with  that  of  mechanics  (as  the 
foundation  of  all  the  energetic  sciences),  has  shown  a  marked 
similarity  with  this  question  of  employment  in  economics.  For, 
according  to  Professors  Callendar  and  Soddy,  of  London  and 
Edinburgh  respectively,  recent  conclusions  have  brought  out 
modern  concepts  of  heat  tending  closely  back  towards,  but  not 
quite  to,  the  early  crude  concept  of  heat  as  a  special  form  of 
matter — caloric. 

It  happens  that,  in  support  of  this  general  view,  the  author 
has  been  urging  for  twenty  years  past  that  entropy,  the  mass- 
factor  of  heat — which  has  been  regarded  ever  since  its  dis- 
covery by  Clausius,  in  1865,  as  merely  a  mathematical  func- 
tion— possessed  physical  reality  and  was  identical  with  the 
mass-factor  of  mechanical-energy:  mass-pairing.  This  comes 
pretty  near  to  stating  that  quantities  of  heat  must  represent 
quantities  of  matter. 

Again,  in  the  same  field,  come  Professors  Poincare*  and 
Planck,  of  Paris  and  Berlin  respectively,  debating  the  new  con- 
cept of  "quantums"  of  energy,  as  basic  attributes  of  small  units 
of  mass.  And  Professor  Callendar  says  that  the  entropy  of 
heat-energy,  the  electrons  of  electrical  energy,  and  the  mass- 
units  of  mechanical  energy,  are  all  one  in  kind.  All  this  brings 
one  back  pretty  closely  to  the  old  concept  of  heat  as  matter 
(caloric). 

Yet  this  reaction  in  scientific  concept  is  not  complete.  Heat 
is  still  regarded  as  energy.  The  new  doctrine  is  merely  a  re- 
minder that,  in  abandoning  the  error  in  the  old,  we  have  wan- 
dered too  far  in  the  new  direction  taken  toward  truth. 

Thus  it  is  frequently  the  case  that  earlier  hypotheses  which 
have  later  become  discredited,  by  some  addition  of  a  minor 
sort  to  our  knowledge,  or  by  some  new  classification  or 
definition  of  principles,  prove  ultimately  to  have  been  based 
upon  a  partial  grasp  of  the  true  nature  of  the  thing,  however 
prematurely  and  inadequately  defined.  It  is  so  with  heat. 
While  heat  is  now  known  not  to  be  matter,  yet  the  early  con- 
cept of  caloric  as  a  form  of  matter  had  much  truth  behind  it. 
For  our  latest  knowledge  of  heat  identifies  it  as  nothing  more 
mysterious  than  a  particular  relationship  between  particles  of 
ordinary  matter. 


644  MODERN   ECONOMIC   TENDENCIES 

The  same  thing  is  true  of  electricity.  Long  known  as  "the 
imponderable  fluid,"  as  "pure  energy,"  as  a  "stress  in  the  ether" 
and  by  other  equally  abstract  definitions,  electricity  is  now 
known  to  consist  merely  of  the  relative  displacement  of  electrons ; 
and  it  is  also  known  that  electrons  consist  of  ordinary,  ponder- 
able, unmystical  mass,  quite  like  that  of  a  rifle-bullet  or  a 
hammer-head  except  for  size  and  velocity,  which  is  measurable 
in  proportion  to  that  of  chemical  atomic  weights. 

This  general  fact  applies  also  to  unemployment.  While  it  is 
true  that  there  is  no  distinct  fund,  such  as  a  sum  of  money, 
available  for  hiring  labor,  yet  there  actually  is  a  definite,  cur- 
rent proportion  of  the  community's  active  energy,  by  which 
labor  must  be  hired  or  else  must  remain  idle.  This  current 
proportion  is  a  function,  not  of  anything  inherent  in  the  per- 
sonalities of  either  employer  or  employee,  but  merely  of  the 
size,  at  the  moment,  of  a  particular  institution  or  relationship — 
the  commercial  one — prevailing  between  quite  ordinary  human 
beings. 

In  this  fact  this  current  fund  of  hiring-energy  is  quite  in 
parallel  with  every  other  known  form  of  energy,  for  all  of 
these  reduce,  upon  analysis,  to  mere  forms  of  relationship  be- 
tween particles,  none  of  which  particles  possess  the  attributes 
of  the  energy  itself.  Therefore  this  hiring-energy  of  the  so- 
ciodynamic  system  must  be  regarded  as  controlled  by  the  same 
fixed,  natural  laws  as  any  of  the  other  energy-funds  of  the 
universe,  and  must  be  debated  in  the  same  terms. 

Social  Energetics. — In  attaining  to  this  view  of  the  sources 
of  employment  and  unemployment  we  shall  have  made  our  first 
certain  step  into  that  new  science  of  energetics  which  is  only 
now  being  formulated — that  science  which  is  destined  to  form 
the  diadem  crowning  the  circle  of  the  natural  sciences  of  in- 
animate energetics — the  science  of  so  do  dynamics,  or  social 
energetics.  Our  material  for  it  is  now  embarrassingly  ample. 

In  the  science  of  mechanical  energetics  we  deal  with  rela- 
tionships between  component  mass-portions  each  of  which  we 
can  see,  identify  and  enumerate.  In  that  of  thermal,  chemical 
and  electrical  energetics  we  deal  with  the  mass-action  of  vast 
communities  of  individual  mass-particles,  each  too  small  to 
be  seen  or  identified,  yet  too  numerous  to  be  counted — except 
that  we  estimate  their  number  as  far  exceeding  that  of  the  entire 


UNEMPLOYMENT  645 

world  of  human  beings.  Yet  we  are  forced  to  regard  each  in- 
dividual molecule  as  probably  different  from  every  other. 

So  now  we  arrive  at  a  science  of  energetics — the  social  one — 
which  deals  with  the  interrelation!  energies  of  a  vast  system 
of  unknown  individual  mass-particles  of  society,  too  numerous 
in  aggregate  to  be  estimated  more  closely  than  in  millions,  yet 
the  individuals  of  which  can,  to  a  degree,  be  identified,  seen 
and  known  as  such!  There  is  no  imaginable  field  for  the 
pursuit  of  knowledge  so  fascinating  as  this.  It  is  one  of 
the  functions  of  this  present  book  to  lay  a  firm  foundation,  so 
far  as  American  economics  are  concerned,  for  the  later  rearing 
of  this  new  science  of  social  energetics — which  shall  guide  the 
ship  of  state  past  wars  and  revolutions  as  the  older  science  of 
astronomy  guides  literal  ships  past  islands,  reefs  and  shoals. 

Relativity. — It  is  some  two  years  after  the  above  was  written 
that  there  appeared,  in  November,  1919,  the  front-page  furor 
of  the  scientific  world  over  the  corroboration,  through  the  solar- 
eclipse  photographs  taken  the  previous  May,  of  the  "relativity" 
theory  of  light  which  was  published  by  Einstein  (I  understand) 
in  1913.  The  impression  made  by  this  new  philosophical  aspect 
of  matter,  energy  and  gravitation  has  been  marked.  Uni- 
versity-halls and  social  dinner-parties  alike  are  keen  for  the 
new  idea. 

Yet  the  revolution  in  physical  concept  enforced  by  this  cor- 
roboration of  Einstein's  theory  as  to  light  and  electricity  alone, 
is  merely  that  which  the  author  urged  as  to  mechanics,  heat 
and  chemical  energy  over  ten  years  ago,  and  which  he  is  urging 
in  these  pages  as  to  sociology.  The  author's  views  upon  rela- 
tivity as  the  basic  concept  for  comprehending  the  sciences  of 
mechanics,  thermodynamics  and  chemistry,  if  not  also  sociology, 
were  published  in  1908,  in  his  book  entitled  "Energy."  His 
preliminary  views  as  to  the  physical  reality  of  entropy,  and  its 
identity  with  mechanical  mass,  were  published  in  1902,  in  his 
"Thermodynamics  of  Heat  Engines." 

In  the  book  of  1908  he  established  mathematically  the  "mean 
energetic  condition"  of  matter  as  that  existing  between  a  pair 
of  associated  quantums  of  mass,  neither  of  which  associates 
possessed  any  attribute  whatever  except  mass-quantity.  He  de- 
fined this  medial  relationship  as  the  basic  condition  of  all  forms 
of  matter,  upon  which  must  be  built  all  of  our  concepts  of  its 


646  MODERN   ECONOMIC  TENDENCIES 

various  attributes  or  qualities,  and  of  its  energetic  action  in 
any  field  of  science  whatever. 

It  was  upon  that  basis  that  the  author  built  his  mathematical 
definitions  of  mechanical  energy — and,  from  that,  the  concept 
of  heat  as  an  energetic  relationship  between  molecules  in  in- 
numerable separate  masses — in  the  face  of  a  complete  lack,  in 
our  text-books  of  thermodynamics,  of  any  exact  definition,  or 
even  concept,  of  either  mechanical  or  thermal  energy.  It  was 
from  this  basis  that  the  mystical  factor  of  thermal  energy — 
entropy — takes  on  immediately  a  clear  and  obvious  physical 
reality,  as  the  mass-pairing  factor  of  molecular  energy. 

With  this  basic  idea  of  inanimate  energies  as  mere  relation- 
ships between  component  individual  particles,  none  of  which 
alone  can  possess  either  energy  or  any  other  attribute  except 
inert  quantity,  once  in  mind,  all  of  the  mysteries  of  mechanics 
and  thermodynamics  open  their  doors.  The  author  always  in- 
troduced it  to  his  every  undergraduate  class  in  thermodynamics 
as  the  prefatory  idea,  instead  of  the  ultimate  mysticism,  and 
never  failed  to  find  it  comprehensible  and  illuminating  to  his 
young  pupils. 

In  all  of  our  natural  sciences,  and  particularly  in  social  en- 
ergetics, our  basic  concepts  must  undergo  this  same  transforma- 
tion, if  we  are  to  accomplish  anything  deserving  self-respect. 
Our  habit  of  attributing  all  qualities  and  actions  to  something 
inherent  in  the  individual  must  be  abandoned,  as  cruelly  mis- 
leading. 

The  absolute  concept  of  the  individual  must  be  dethroned 
in  favor  of  the  new  concept  of  all  energetic  manifestations — 
whether  in  the  fields  of  mechanics,  economics,  ethics  or  morali- 
ties— as  manifestations  merely  of  ever  changing  relationships 
between  individuals,  the  nature  of  which  individuals  changes 
very,  very  slowly,  from  century  to  century,  if  at  all.  There  is 
no  field  of  scientific  thought  in  which  the  impotence  of  the 
individual,  and  the  importance  of  the  relationships  between 
individuals,  is  so  basic  and  so  illuminating  as  in  social  ener- 
getics. In  material  energetics  it  is  now  supreme.  In  social 
energetics  it  soon  will  be  so. 

(These  last  lines  following  the  subhead  "Relativity"  have 
been  added  in  November,  1919,  following  the  advertisement  of 
Einstein's  well  deserved  fame.  But  it  should  be  a  matter  of 
interest  to  Americans  that  the  lines  above  that  subhead  were 


UNEMPLOYMENT  647 

written  in  a  New  York  City  skyscraper-office  long  before  then. 
The  1908  book  carries  its  own  evidence;  but  it  should  be  stated 
here  that  the  outline  of  mechanical  and  thermodynamic 
philosophy  published  therein  was  regularly  taught  by  the  author 
to  his  every  class  at  the  Worcester  Polytechnic  from  1900  to 
1906.  All  these  mutual  corroborations  should  add  weight  to 
the  argument  of  this  book.) 


CHAPTER  XXI 

PANICS  AND  CRISES 

IT  was  stated  above  that  the  volume  of  employment  available 
at  any  time  depended  upon  the  momentarily  prevailing  rate 
of  change  in  the  credit-barometer.  Now  this  is  a  barometer 
peculiar  in  the  fact  that  it  rises  slowly  and  then  drops  sud- 
denly. The  alternations  of  these  two  processes,  occurring  fairly 
periodically,  bring,  or  express,  corresponding  waves  of  good 
and  bad  times,  with  corresponding  minimum  and  maximum 
points  in  that  deficit  in  employment  which  never  disappears 
entirely.  Every  period  of  prosperity  ends  suddenly  in  a  panic 
or  crisis,  and  from  every  panic  or  crisis  the  commercial  world 
climbs  slowly  back  to  prosperity  again. 

Usually  the  period  of  prosperity  preceding  each  panic  of  our 
past  history  has  been  begotten  by  war.  War  arouses  public 
confidence,  through  patriotism,  to  a  degree  unrivaled  by  any 
other  means  yet  discovered.  This  intangible,  all-pervading, 
aggressive  confidence  then  expands  correspondingly  the  coun- 
try's fund  of  tangible  credit-instruments,  usually  first  by  gov- 
ernmental issue,  but  secondarily  by  private  issue.  These  credits 
then  enter  the  market  as  additional  circulating-medium  and 
stimulate  demand  for  many  commodities.  The  money  earned 
in  supplying  these  is  finally  passed  around,  active  demand 
spreads  to  all  commodities,  prices  rise,  labor  is  in  demand,  and 
by  the  time  the  war  is  over  commercial  prosperity  has  been 
fully  established.  This  has  been  true  of  every  social  convulsion 
of  the  last  four  generations. 

But  it  must  not  be  forgotten  that  no  conceivable  degree  of 
destruction  of  commodities  by  the  war  could  have  created  any 
demand  for  the  manufacture  of  new  to  replace  them,  had  the 
credit-issues  not  been  there  to  serve  as  circulating-medium; 
and  secondly,  that  the  credit-issues  required,  in  order  that  they 
should  be  good  and  stable,  only  mutual  confidence  on  the  part 

648 


PANICS  AND   CRISES  649 

of  the  people.  For  all  other  factors  except  this  confidence  had 
been  there  before  the  credits  and  active  purchases  began. 

Such  was  the  case  in  this  country,  for  instance,  in  and  after 
the  Civil  War.  During  this  war  the  government  issued  credits 
at  a  rate  quite  unparalleled  in  our  previously  modest  financial 
history.  The  amounts  per  capita  would  look  small  beside  modern 
data,  but  they  were  no  less  remarkable  in  comparison  with  what 
had  preceded. 

Then,  before  the  war  was  finished,  the  business-people  found 
that  this  game  was  a  good  one.  These  credits  would  buy  goods 
in  enormous  quantities  and  keep  factories  busy.  Profits  could 
be  made  upon  them,  even  bigger  than  when  relying  upon  the 
more  direct  methods  of  finance  prevailing  before  the  war. 

So  the  new  plan,  after  the  usual  fears  and  protests,  was  ac- 
cepted and  utilized  to  the  utmost.  By  1864,  although  the 
issues  of  the  war  then  hung  shrouded  in  the  deepest  gloom, 
prosperity  was  at  hand  in  the  North.  By  the  time  the  armies 
had  disbanded,  in  1865,  it  was  in  full  swing.  Ever  since  then 
the  financial  world  has  practiced  most  industriously  the  profit- 
able policy  then  inaugurated — of  incurring  huge  debts,  the  in- 
terest upon  which  was  paid  immediately,  and  the  principal 
ultimately,  by  the  Ultimate  Consumer. 

The  same  was  the  case  with  the  Cuban  War  of  1898,  to  a 
degree  which  none  can  realize  except  those  who  have  lived 
through  it.  Before  that  war  American  public  confidence  had 
reached  its  lowest  ebb.  The  era  of  graft  and  corruption  which 
came  as  a  reaction  from  the  patriotism  of  the  Civil  War  had 
humiliated  every  American  citizen  before  the  world.  Our  local 
and  federal  governments  were  commonly  spoken  of  as  rotten, 
our  navy  puerile,  our  merchant  marine  gone,  our  exports  small, 
our  diplomatic  service  far  inferior  to  that  of  Europe,  etc.,  etc. 
One  could  scarcely  find  an  American  who  would  admit  our 
ability  to  compete  with  Europe  in  any  line  of  human  effort 
except  agriculture. 

In  addition,  we  were  just  recovering,  when  the  Cuban  war- 
cloud  gathered,  from  the  commercial  panic  of  1893.  Our  finan- 
cial confidence  was  as  low  as  our  political. 

Our  lack  of  patriotic  faith  naturally  begot  a  similar  feeling 
toward  us  abroad.  All  over  Europe  (except  in  England)  the 
belief  was  common  that  Spain  would  march  across  the  States 
to  Chicago. 


650  MODERN  ECONOMIC  TENDENCIES 

But  the  few  months  of  war  transformed  all  this  gloom  into 
radiance.  Our  naval  victories  had  been  phenomenal.  Our 
losses  by  land,  due  almost  entirely  to  sickness,  had  revealed 
gross  corruption,  it  is  true;  but  in  overcoming  it  we  had  found 
ourselves.  Business  was  good  and  steadily  growing  better.  We 
were  exporting  in  large  quantities  such  things  as  locomotives 
and  machine-tools — articles  which  had  been  regarded  before  as 
hopelessly  superior  abroad,  in  price  if  not  in  design  and  work- 
manship. Finally  came  the  spectacular  expansion  of  capitalism 
which  has  already  been  cited,  responding  to  the  urgent  demand 
for  commodities,  and  the  boom  was  launched  which  swung 
forward,  with  but  one  brief  pause,  until  the  panic  of  1907. 

This  same  sequence  of  prosperity  to  war  or  revolution  has 
been  true  also  of  earlier  wars  and  other  lands,  but  to  a  lesser 
degree  as  we  recede  from  modern  commercial  conditions.  The 
phenomenon  is  easily  discernible  in  the  French  Eevolution,  in 
the  rapid  rise  of  the  nation's  finances  from  the  Directorate — 
when  reorganization  was  undertaken  by  a  government  so  poor 
that  its  officials  sat  in  a  bare  room,  at  a  rickety  table  borrowed 
from  the  janitress — to  the  transcendant  confidence  and  pros- 
perity under  Napoleon  a  few  years  later. 

It  was  remarkably  visible,  again,  in  the  rise  of  France  from 
the  horrors  of  defeat  by  the  Prussians  in  1870,  and  from  the 
famine  of  the  Commune  in  1871,  when  dogs  and  rats  com- 
manded high  prices  as  food,  to  her  position  of  a  few  years  later, 
as  banker  for  the  world.  Weighted  with  her  staggering  burden 
of  indemnity  to  Germany  and  cowed  by  defeat,  nevertheless 
Thiers,  by  an  appeal  to  sheer  patriotism,  to  be  expressed  in 
the  economic  field,  led  her  up  into  solvency,  liberty  and  pros- 
perity within  a  decade. 

The  close  of  a  war  or  revolution — a  form  of  social  convul- 
sion always  accomplishing  automatically  the  abolition  of  some 
grievous  burden  blocking  life — always  leaves  a  people  with  a 
sense  of  relief,  as  of  a  human  individual  after  nausea,  yet  in 
a  state  of  stimulated  hope,  with  confidence  as  to  the  future 
dominating  all  present  pain  and  gloom.  The  recent  destruction 
of  life  and  wealth  by  the  war  then  exerts  no  perceptible  re- 
tardation upon  the  general  sense  of  prosperity.  Its  utmost 
extent  is  incomparable  with  that  which  has  been  brought  into 
existence  by  the  mere  fact  of  patriotic  mutual  confidence  and 
credit  amongst  the  people. 


PANICS  AND  CRISES  651 

Even  defeat,  if  bravely  borne — as  French  experience  has 
thrice  shown  us — is  little  bar  to  a  prompt  return  of  pros- 
perity. Indeed,  victory,  as  German  experience  since  1870  has 
shown  us,  and  as  the  shameful  history  of  the  American  Re- 
publican Party  after  Lincoln's  death  demonstrated,  is  the  more 
dangerous  alternative. 

After  war  is  over  an  era  of  expansion  follows.  Everyone 
is  ready  to  undertake  new  enterprises,  sure  of  the  ability  of  the 
people  to  absorb  the  output.  Each  issuer  or  acceptor  of  new 
credit-paper  is  ever  feeling  more  boldly  for  the  limit.  But  as 
each  new  issue,  if  accepted,  provides  an  additional  foundation 
for  the  release  of  still  greater  social  activity,  for  still  wider 
confidence  and  for  still  larger  issues,  the  growth  is  cumulative. 

As  this  process  is  an  exceedingly  profitable  one  to  those  who 
issue  the  credit-instruments,  expansion  at  an  accelerating  rate 
is  inevitable.  Then  all  that  a  man  needs  do  is  to  print  this 
credit-paper  with  sound  judgment  as  to  what  the  people  will 
accept,  divide  its  value  with  him  who  first  accepts  it,  and  the 
fact  that  it  is  already  "in  circulation,"  and  paying  its  interest- 
charges,  makes  it  acceptable  to  all  others.  The  conspirators 
have  thus  literally  "made"  money. 

According  to  the  commercialists  themselves,  over  ninety-five 
per  cent  of  all  our  circulating-medium — just  as  much  the  coun- 
try's money  as  are  the  coins  struck  from  the  mint — consists  of 
instruments  in  the  creation  of  which  not  one  whit  more  of 
equity  to  the  people  than  this  was  ever  embodied. 

This  does  not  mean  that  the  issue  of  credit-instruments  does 
not  serve  a  public  need.  Credit  in  adequate  volume,  as  was 
demonstrated  above  by  the  simile  of  the  twenty  men,  is  one  of 
the  first  essentials  to  the  life  of  the  modern  populous,  complex 
community.  But  what  it  does  mean  is  that  the  need  for 
credit  is  a  public  need,  and  not  a  private  privilege;  and  that 
the  creation  of  credit,  whoever  may  print  and  issue  the  slips 
of  paper,  is  a  public  act. 

It  is  not  the  printing  and  issue  of  the  securities,  but  their 
acceptance,  and  their  redemption  by  productive  effort  on  the 
'part  of  the  general  public,  which  alone  creates  their  social* 
value.  The  issuer  of  credit-instruments  should  no  more  be 
permitted  to  sell  them,  nor  to  draw  interest  upon  them,  than 
should  the  maker  of  a  dime,  or  a  locomotive,  or  a  sewer,  or  a 
postage-stamp. 


652  MODERN   ECONOMIC   TENDENCIES 

It  is  also  to  be  noted  that  the  value  of  all  credit-instruments, 
of  whatever  sort,  whether  postage-stamps,  stocks,  bonds,  bank- 
notes, personal  commercial  paper  or  gold-certificates,  rests 
squarely,  at  bottom,  only  upon  the  general  wealth  and  activity 
of  the  country  as  a  whole.  They  are  expressions  not  merely 
of  the  fertility  of  all  the  farms,  mills,  railroads,  etc.,  as  mate- 
rial appliances  divorced  from  humanity,  but  of  the  amazing 
productivity  of  a  population  which  is  at  once  politically  free 
and  confident  in  spirit  to  co-operate  in  their  use. 

Therefore,  when  they  collapse  in  valuation,  no  careful  person 
will  think  of  attributing  the  fact  to  a  fault  in  our  material 
appliances,  but  merely  to  the  fact  that  our  spirit  of  co-opera- 
tion is  not  as  complete  or  certain  or  intelligent  as  had  been 
thought.  The  panic  of  1873,  for  instance,  is  commonly  and 
carelessly  attributed  to  an  excessive  rate  of  railway-building 
during  the  preceding  nine  years  of  active  prosperity.  But 
the  facts  do  not  support  any  such  a  superficial,  materialistic 
theory.  The  data  as  to  railway-building,  given  in  Table  5,  do 
not  reveal  any  abnormal  rate  during  this  period,  as  compared 
with  other  periods  which  did  not  end  disastrously. 

Economic  phenomena  are  never  so  simple  and  obvious  as  all 
that.  They  are  always  natural,  based  always  upon  a  whole- 
some individual  psychology  underneath;  but  they  are  always 
intricate  in  their  reactions  between  those  individual  psycholo- 
gies, enforced  by  intricate  institutional  relationships. 

Then  even  the  privately  issued  credit-securities  of  to-day,  it 
must  be  remembered,  are  not  issued,  in  fact,  against  the  wealth 
privately  owned  by  the  agent  of  issue,  as  is  so  widely  supposed 
to  be  the  case.  This  is  one  of  the  most  widespread  of  economic 
errors. 

The  stock  issued  by  a  railroad,  for  instance,  cannot  possibly 
be  made  good  by  any  amount  of  skill  and  industry  in  the 
operation  of  the  road  alone — although,  of  course,  blunder  or 
negligence  on  the  part  of  the  road  can  always  spoil  it.  What 
makes  the  stock  good  is  the  industry  and  integrity  of  the  mass 
of  shippers  who  use  the  road.  The  paper  is  issued,  in  reality, 
upon  the  public  confidence  of  the  entire  population  served  by 
the  road;  for  it  is  this  alone  which  gives  value  either  to  the 
tangible  property  owned  by  the  issuing  agent,  or  to  the  paper 
nominally  based  thereon. 


PANICS  AND   CRISES  653 

The  Inevitable  Fate  of  any   Cumulative  Expansion. 

The  process  of  cumulative  and  accelerative  expansion  of  credit- 
paper  described  above  can  meet  but  one  end.  Whether  stimu- 
lated by  the  interest  borne  thereon,  as  was  chiefly  the  case 
in  1870,  or  by  the  prospective  creation  of  both  principal  and 
interest,  as  is  true  to-day,  the  process  is  certain  to  overstep 
the  limit  of  the  people's  endurance. 

The  end  may  come  in  any  of  a  thousand  different  ways — 
probably  not  twice  alike,  in  detail.  But  however  it  comes, 
some  issue  some  day  proves  to  be  unacceptable  and  breaks  in 
valuation.  With  it  goes  a  lot  of  other  delicate  issues  which 
had  been  floated  with  difficulty,  and  then  the  whole  balloon- 
like  structure  collapses  through  contagious  panic.  The  crash 
is  as  cumulative  as  the  expansion  had  been,  but  far  more  rapid. 

Such  were  the  collapses  of  1873  and  1907,  two  of  the  most 
pronounced  in  our  financial  history.  But  here  the  similarity 
between  the  two  panics  ends;  for  in  the  two  cases  both  the 
form  of  credit-instrument  and  the  cause  of  collapse  were  quite 
different. 

In  the  first  case  it  was  credit-currency  which  swelled  until 
it  burst.  In  the  second  it  was  industrial  credits,  in  the  form  of 
interest-bearing  commercial  securities,  which  gave  way. 

In  the  first  case  it  was  the  ratio  of  volume  of  credit-currency 
to  gold  which  was  stretched  too  far.  In  the  second  it  was 
the  ability  of  the  people  to  pay  interest,  dividends  and  com- 
mercial costs  which  was  trespassed  upon  too  far. 

While  this  contrast  may  not  be  stated  too  rigidly,  because 
in  both  cases  both  factors  were  at  work  to  some  degree,  yet 
in  general  it  is  true.  In  the  first  case  the  crisis  was  precipi- 
tated nominally  by  the  building  of  railroads  faster  than  those 
agricultural  and  industrial  developments  upon  which  railroads 
must  depend  could  grow;  but  in  reality  it  was  due  to  the 
faulty  method  of  their  finance,  and  to  the  widespread  fear  of 
the  currency.  For  at  that  time  bogus  money  was  a  familiar 
institution.  Nearly  every  house  sheltered  some  samples  of  the 
worthless  Confederate  money,  as  well  as  a  few  instances  of 
bills  issued  by  northern  State-banks  which  were  equally  worth- 


In   the    second    case    the    cause    was    quite    different,    lying 
merely  in  the   inability   of  the  people,   through   the   steadily 


654  MODERN   ECONOMIC   TENDENCIES 

declining  purchasing-power  of  the  dollar,  to  carry  the  in- 
creasing burden  of  commercial  costs.  In  1873  prices  were 
falling;  so  this  sort  of  a  burden  could  not  then  visibly  appear. 
But  in  1907  prices  were  already  rising  rapidly,  and  visibly 
contained  the  seed  of  discontent  and  distrust. 

In  1873,  from  whatever  source  the  pressure  may  have  come, 
it  found  the  currency  and  the  banks  the  weakest  links  in  the 
economic  system.  Therefore  the  currency  collapsed,  gold  went 
to  a  premium  and  many  banks  failed.  But  in  the  panics  of 
1885,  1893  and  1907  all  this  was  decreasingly  true.  In  the 
"Silent  Panic"  of  1914  there  was  hardly  a  trace  left  of  either 
bank-failure  or  currency-collapse.  Yet  it  was  an  indubitable 
crisis,  if  not  a  panic. 

The  inflation  which  preceded  the  panic  of  1873  took  the 
form  of  an  over-issue  of  bank-notes  without  proper  basis  in 
gold.  While  the  modern  menace  of  an  over-issue  of  industrial 
securities,  with  its  resultant  deficit  in  the  purchasing-power  of 
the  people,  was  already  present  in  rudimentary  form,  yet  it 
was  still  a  feature  of  minor  importance.  While  it  was  true 
that  the  commercialists  were  building  railroads  too  fast,  yet 
disaster  arose  neither  from  this  physical  cause,  nor  for  the 
reason  prophetically  visible  in  the  too  rapid  expansion  of  our 
own  day,  namely,  a  too  great  burden  of  interest. 

The  real  trouble  was  that,  lacking  our  modern  system  for 
the  expansion  of  credit  by  the  unlimited  issue  of  private  se- 
curities based  upon  material  appliances,  yet  measured  in  refer- 
ence to  a  broad  and  firm  gold-backed  currency,  the  only  way 
to  extend  the  country's  credit  was  to  borrow  outright  from  the 
banks.  The  only  way  in  which  the  banks  could — and  naturally 
would — respond,  under  the  laws  then  existing,  was  to  issue 
more  paper-currency  against  a  fixed  basis  of  gold.  And  paper- 
currency,  being  merely  a  representative  or  token  of  gold,  must 
have  a  proper  gold-basis  or  else  fail. 

Modern  industrial  securities,  on  the  other  hand,  being  issued 
against  the  general  wealth  of  the  land  in  the  form  of  industrial 
appliances,  do  not  need,  to  equal  degree,  a  gold-basis.  When 
the  paper-currency  of  1873  was  drafted  out  of  its  proper  func- 
tion into  that  now  played  by  industrial  securities,  it  naturally 
failed. 

But  when  our  modern  circulating-securities  fail  it  will  not 
be  from  the  same  reason.  Hence  the  elaborate  provision  which 


PANICS  AND   CRISES  655 

has  been  made,  since  1873,  against  a  collapse  of  the  currency 
or  the  banks,  in  the  gold-basis  and  the  Federal  Reserve  banks, 
will  then  be  of  not  the  slightest  avail  to  prevent  disaster.  For 
there  is  not  a  clause  anywhere  in  all  this  to  protect  the  Con- 
sumer's dollar  against  continued  dilution  by  commercialism, 
which  is  the  modern  economic  menace. 

Up  to  1864  a  large  portion  of  the  paper-currency,  then 
forming  the  only  means  for  expansion  of  credit,  had  been  issued 
by  the  State  banks;  and  some  of  these  were  very  shaky  in  the 
foundations  and  questionable  as  to  personnel,  through  influence 
by  politics  as  yet  unprotected  by  civil-service  reform.  Even 
as  late  as  1873  there  was  a  much  larger  volume  of  paper- 
currency  in  use,  in  proportion  to  the  total  volume  of  trade, 
than  now.  Many  modern  substitutes  for  bank-notes  did  not 
exist  at  all.  Even  fractional  coins  were  yet  rare.  The  bulk 
of  all  retail-trade  was  then  conducted  by  means  of  "shin- 
plasters" — State  or  private  bank-notes  of  the  value  of  fifty, 
thirty-five,  twenty-five,  fifteen,  ten,  five  and  even  three  cents 
each — which  filled  the  tills  of  the  shop-keepers  by  the  basketful. 
And  no  cash-registers  then ! 

When  panic  arose  all  these  notes,  big  and  little,  became  re- 
ceivable at  various  discounts  below  their  face-value,  or  became 
worthless.  Since  there  were  then  no  telephones  nor  tickers, 
these  discounts  had  to  be  quoted  by  the  banks  from  day  to 
day,  or  passed  from  mouth  to  mouth.  But  since,  before  these 
shin-plasters  had  appeared,  the  people's  only  reliance  for  frac- 
tional currency  had  consisted  largely  of  "bits,"  or  sharp- 
cornered  pie-shaped  sectors  cut  from  some  larger  coin,  or  else 
of  mucilaged  postage-stamps — which  formed  an  ideal  instru- 
ment for  making  change  in  a  crowded  omnibus  on  a  rainy 
day — the  situation  was  accepted  cheerfully,  as  being  not  so 
bad  as  it  had  been  before. 

But  in  the  more  recent  crises,  it  need  hardly  be  said,  these  cur- 
rency symptoms  have  been  all  but  wanting.  In  that  of  1893 
there  was  a  minor  difficulty  in  securing  paper,  it  is  true;  but 
this  is  quite  a  different  situation  from  having  paper  in  surplus, 
with  inability  to  secure  gold.  In  1893,  for  instance,  the  author's 
business-office  had  to  pay  all  its  salaries  with  silver  dimes,  bills 
being  unobtainable. 

But  by  1907  almost  the  last  vestige  of  trouble  from  the  cur- 
rency had  disappeared.  With  the  advent  of  the  Federal  Reserve 


656  MODERN    ECONOMIC   TENDENCIES 

Bank,  since  then,  it  is  probable  that  never  again  shall  we  suffer 
from  weakness  in  our  currency  or  in  our  financial  depositaries. 
But  that  need  not  prevent  us  from  having  some  much  greater 
trouble,  from  sources  which  never  before  have  given  more  than 
threat. 

Historical. — If  one  attempts  to  read  accepted  histories  of 
crises  and  panics,  either  in  order  to  collect  historical  data  or 
to  learn  the  views  of  the  orthodox  as  to  their  causes,  he  is 
blocked  by  a  complete  lack  of  agreement  among  such  authori- 
ties. This  is  true  not  only  as  to  theories  of  cause,  but  also  as 
to  what  a  crisis  or  panic  may  be.  There  is  no  standardized 
criterion  by  which  one  may  know  whether  a  panic  or  crisis 
exists  or  not.  This  is  probably  due  to  the  steady  evolution  in 
the  nature  of  each.  The  subject  is  far  from  being  a  simple  one. 

Thus,  one  authority  emphasizes  the  need  for  distinction  be- 
tween crises  and  panics,  citing  historical  instances  of  each  with- 
out the  other.  One  looks  for  "tight"  money  as  a  sign  of  panic, 
another  for  high  prices,  another  for  low  prices,  and  still  another 
for  commercial  or  bank  failures.  Indeed,  it  seems  indubitable 
that  each  must  be  writing  from  some  quite  personal  point  of 
view.  One  is  interested  in  banks,  another  in  manufacture,  etc., 
etc.  Some  ascribe  all  American  crises  to  foreign  wars. 

None,  so  far  as  I  know,  ascribe  them  to  any  basic  error  in 
the  method  of  our  prosperity.  They  cling  to  the  Prussian 
trick  of  regarding  ourselves  as  sinless,  blaming  someone  else 
for  all  ills.  Their  furthest  ambition  is  to  criticise  either  de- 
fects in  the  currency  or  too  great  haste  in  building  railroads 
or  other  appliances.  Yet  neither  of  these  can  be  regarded  by 
the  author  as,  of  themselves,  the  cause  of  modern  panics. 

A  great  many  have  investigated  and  emphasized  the  obvious, 
though  only  approximate,  periodicity  of  crises;  yet  without 
clear  helpfulness  as  to  their  comprehension  or  prevention. 
Periodicity  indicates  the  naturalness  of  a  phenomenon,  but  it 
does  not  aid  in  its  prevention.  One  writer  even  carries  this 
to  the  point  of  connecting  the  periodicity  of  panics  with  the 
regularity  of  the  Jewish  calender,  thus  laying  the  responsi- 
bility for  all  financial  crises  upon  the  well-known  commercial 
spirit  of  the  Jewish  race ! 

Nearly  all  lay  stress  upon  the  cheapening  of  gold  as  a  cause 
of  panic,  although  gold  has,  in  general,  cheapened  fairly  steadily, 
whereas  panics  alternate  with  prosperity  as  the  swing  of  a 


PANICS  AND   CRISES  657 

pendulum.  Or,  when  gold  has  happened  to  take  a  sudden 
jump  downwards,  as  in  1849,  it  did  not  create  a  panic.  The 
next  panic  did  not  occur  until  1857. 

The  list  is  too  long  for  debate.  But,  as  evidence  that  the 
explanation  of  more  recent  crises  is  not  necessarily  that  suit- 
able for  the  earlier  ones,  the  following  is  quoted  from  an 
article  in  the  Quarterly  Journal  of  Economics  for  1894  by 
Albert  C.  Stevens: 

"The  year  immediately  preceding  the  financial  crisis  of 
1893  did  not  present  symptoms  or  indications  of  approach- 
ing panic  which  generalizations  from  the  history  of  preceding 
business-crises  in  the  United  States  had  declared  should  be 
observable  at  such  a  time.  A  summary  in  a  recent  publica- 
tion ('A  Brief  History  of  Panics  and  their  Periodical  Oc- 
currence in  the  United  States/  by  Clement  Juglar)  of  what 
have  been  regarded  as  essential,  underlying  conditions  of 
approaching  panic,  enumerates  wonderful  prosperity  (as  in- 
dicated by  numerous  enterprises  and  schemes),  a  rise  in  the 
prices  of  commodities,  of  land  and  of  houses,  an  active  de- 
mand for  workmen,  lower  rates  of  interest,  a  general  taste 
for  speculation  ('in  order  to  grow  rich  at  once'),  growing 
luxury  leading  to  excessive  expenditures,  'and  a  very  large 
amount  of  discount  and  loans  and  bank-notes,  and  very  small 
reserve  in  specie  and  legal  tender  notes,  and  poor  and  de- 
creasing deposits/  " 

Stevens  further  quotes  Juglar  as  saying: 

"The  fact  that  an  analysis  of  the  bank-returns  to  the 
Comptroller  of  the  Currency  shows  that  available  resources 
(capital,  deposits,  surplus  and  undivided  profits),  as  compared 
with  demands  (loans  and  discounts),  are  good  and  growing 
.  .  .  justifies  the  prediction  of  the  steady  development  of  a 
prosperous  period." 

This  was  apparently  written,  says  Stevens,  some 

"six  or  eight  months  before  the  crash  in  industrial  securities 
in  May,  1893,  with  which  the  panic  made  its  formal  appear- 
ance in  the  United  States.  Evidently,  then,  the  results  of 
elaborate  investigation  into  banking-statistics  from  1811  to 
1892,  covering  eight  panic-periods  .  .  .  must  be  regarded  as 
not  entirely  trustworthy  indications/' 


658  MODERN   ECONOMIC   TENDENCIES 

This  is  the  author's  point.  To  those  who  look  upon  the  spirit 
of  these  pages  as  too  radical  to  be  trustworthy,  it  is  urged  that, 
in  this  matter  of  panics  and  their  cause,  if  in  no  other,  there 
is  no  trustworthy  orthodoxy.  This  entire  field  of  social  science 
regarding  unemployment,  crises,  panics,  etc.,  is  wide  open  to 
all  comers,  with  the  conjectures  of  each  new  champion  as  well 
accredited  by  his  lack  of  past  record  as  those  of  the  old-timers 
stand  self-condemned. 

Therefore,  in  getting  the  statistical  measure  of  the  historical 
evolution  of  the  modern  financial  crisis,  the  author  is  going  to 
leave  conclusions  largely  to  the  reader.  He  will  not  even 
attempt  to  define  the  terms  "crisis"  and  "panic."  It  seems  that 
there  may  be  a  proper  distinction  between  the  two;  yet  it  can 
be  of  little  service  here.  Here  is  of  interest  only  the  two  broad 
attributes  of  both  crisis  and  panic,  namely,  (1)  Their  root  in 
questions  of  public  credit,  and  (2)  Their  fruition  in  unem- 
ployment. What  manner  of  details  may  intervene  between 
these  two  extremities  of  the  modern  financial  organism  must 
be  left  to  specialists  for  debate. 

One  feature  unquestionably  connected  with  crises,  panics  and 
periods  of  unemployment  is  that  of  commercial  failures.  Table 
72  gives  the  history  of  these,  year  by  year,  for  the  last  six 
decades,  taken  from  Bradstreet's. 

One  feature  of  Table  72  which  should  not  escape  notice  is 
the  wonderful  stability  of  the  proportion  of  commercial  failures 
to  total  population,  both  in  number  and  in  amount  of  pecuniary 
liability.  The  average  for  the  six  decades  is  144  failures  per 
million  of  population  per  annum,  with  an  average  liability  of 
$2.59  per  capita.  The  maximum  variation  from  these  figures  is 
relatively  slight  and  infrequent  (aside  from  the  all  but  disappear- 
ance of  commercial  failures  during  the  Civil  War).  This  showing 
of  Table  72  is  conclusive  proof,  to  the  mind  trained  in  the  natural 
sciences,  that  all  such  social  phenomena  as  these  are  determined 
by  a  mechanical  fluid  equilibrium  which  is  at  base  always  stable. 

The  periods  of  a  temporary  exaggeration  of  commercial 
failure,  should  these  be  regarded  as  criteria  of  crises  or  panics, 
are  noted  in  Table  73. 

The  influence  of  the  outbreak  of  the  Civil  War  in  the  in- 
crease in  commercial  failures  is  plain ;  but  a  far  more  significant 
feature  is  the  remarkable  dearth  of  business-failures  throughout 
the  period  immediately  following  the  outbreak,  and  continuing 


PANICS  AND   CRISES 


until  1873,  or  even  1876.  A  sure  consequence  of  every  war  of 
recent  history  has  been  a  period  of  marked  commercial  pros- 
perity, arising  before  the  war  was  completed  and  continuing 

TABLE  72 
COMMERCIAL  FAILURES,  1857  TO  1916 


Year 

Number  per 
Million 
Inhabitants 

Liabilities 
per 
Capita 

Year 

Number  per 
Million 
Inhabitants 

Liabilities 
per 
Capita 

1857 

170 

$10.07 

1887 

163 

$2.66 

1858 

142 

3.21 

1888 

177 

2.05 

1859 

128 

2.10 

1889 

176 

2.41 

1860 

117 

2.54 

1890 

173 

3.01 

1861 

217 

6.45 

1891 

191 

2.95 

1862 

50 

0.70 

1892 

157 

1.74 

1863 

15 

0.23 

1893 

228 

5.18 

1864 

15 

0.25 

1894 

203 

2.53 

1865 

15 

0.50 

1895 

189 

2.49 

1866 

42 

1.50 

1896 

212 

3.19 

1867 

76 

2.65 

1897 

185 

2.13 

1868 

70 

1.71 

1898 

165 

1.77 

1869 

74 

1.98 

1899 

124 

1.21 

1870 

92 

2.28 

1900 

141 

.81 

1871 

73 

2.14 

1901 

141 

.46 

1872 

100 

2.97 

1902 

147 

.48 

1873 

123 

5.44 

1903 

150 

.93 

1874 

135 

3.59 

1904 

149 

.76 

1875 

174 

4.53 

1905 

138 

.23 

1876 

200 

4.19 

1906 

125 

.40 

1877 

190 

4.08 

1907 

135 

2.27 

1878 

219 

4.90 

1908 

177 

2.51 

1879 

136 

2.00 

1909 

143 

1.71 

1880 

94 

1.31 

1910 

137 

2.19 

1881 

109 

1.58 

1911 

143 

2.04 

1882 

128 

1.92 

1912 

162 

2.13 

1883 

170 

3.20 

1913 

165 

2.80 

1884 

198 

4.09 

1914 

184 

3.61 

1885 

188 

2.20 

1915 

219 

3.00 

1886 

170 

1.98 

1916 

189 

1.89 

with  acceleration  for  several  years  thereafter.  Why  the  usual 
panic  should  arise  in  Wall  Street  over  every  war  or  rumor  of 
was  is  beyond  the  author's  comprehension.  The  prime  thing 
to  be  done  in  the  face  of  any  such  a  rumor — if  speculation  can 


660 


MODERN   ECONOMIC   TENDENCIES 


be  guided  by  past  history — is  to  buy  everything  in  sight  which 
can  be  held  for  one  or  two  years.  The  winnings  will  be  sure 
and  large. 

TABLE  73 

MAXIMUM  PERIODS  OF  COMMERCIAL  FAILURES 
(Stated  as  Percentages  above  the  Average,  as  taken  from  Table  72) 


Year  of 
Maximum 

Number  of  Failures  per 
Million  Inhabitants 

Liability 
per  Capita 

1857 

18 

290 

1861 

50 

150 

1873 



111 

1875 

.... 

76 

1876 

39 



1884 

.... 

'  58 

1893 

58 

102 

1896 

47 

24 

1908 

23 



1914 

.... 

'46' 

1915 

52 

:            

The  column  of  "liabilities  per  capita"  of  Table  73  appears 
as  decreasing  most  markedly  during  the  sixty  years.  In  other 
words,  the  element  of  chance  in  business-enterprises  has  been 
greatly  reduced.  In  the  later  panics  there  are  as  many  failures 
as  before  in  number,,  but  not  so  much  money  is  involved.  The 
big  concerns  are  becoming  more  stable.  It  is  the  little  new 
ones  which  keep  up  the  number  of  failures. 

The  amount  of  loss  through  commercial  failures,  even  in 
times  of  panic,  has  been  falling.  Amounting  to  only  about  ten 
dollars  per  person  in  the  panic  of  1857,  it  has  fallen  to  about 
one-third  of  that  sum  in  the  "silent"  panic  of  1914. 

The  statistics  as  to  bank-failures,  in  Table  74,  show  a  much 
greater  vacillation  from  year  to  year  than  do  general  commer- 
cial failures.  They  also,  as  well  as  commercial  failures,  show 
a  direct  loss  per  capita  which  is  insignificant,  or  which  would  be 
so  if  it  were  distributed  evenly  over  the  population.  The  sort  of 
losses  due  to  bank-failures  which  are  of  chief  importance  are 
the  indirect  ones,  through  disturbance  of  other  business  and 
the  discouragement  of  persons  of  small  means. 


PANICS  AND   CRISES 


661 


TABLE  74 
BANK  FAILURES 


National,  State, 

Savings,  Private 

National  Banks 

Banks,  and  Loan  and 

Trust  Companies 

Together 

Year 

Number 
of  Failures 

Loss  on 
Assets 

Number 
of  Failures 

Loss  on 
Assets 

Number  of 
Failures 

Liabilities 
per 

per 
Million 
Inhab- 
itants 

per  1000 
Inhab- 
itants 

Year 

per 
Million 
Inhab- 
itants 

per  1000 
Inhab- 
itants 

per  Million 
Inhab- 
itants 

Thousand 
Inhab- 
itants 

1865 

3 

$3 

1893 

97 

$223 

893 

$2540 

1866 

6 

41 

1894 

31 

70 

130 

200 

1867 

19 

63 

1895 

52 

102 

194 

330 

1868 

8 

7 

1896 

38 

107 

277 

800 

1869 

5 

6 

1897 

53 

202 

145 

290 

1870 

0 

0 

1898 

9 

10 

69 

220 

1871 

15 

43 

1899 

16 

15 

49 

330 

1872 

0 

0 

1900 

8 

28 

56 

110 

1873 

26 

89 

1901 

14 

19 

72 

210 

1874 

7 

9 

1902 

3 

4 

37 

80 

1875 

11 

53 

1903 

15 

12 

112 

420 

1876 

20 

22 

1904 

24 

33 

117 

270 

1877 

21 

72 

1905 

26 

51 

75 

290 

1878 

29 

27 

1906 

9 

11 

53 

270 

1879 

16 

26 

1907 

8 

28 

102 

2370 

1880 

6 

2 

1908 

27 

66 

149 

1050 

1881 

0 

0 

1909 

10 

12 

44 

130 

1882 

6 

62 

1910 

7 

3 

48 

340 

1883 

4 

11 

1911 

3 

6 

65 

280 

1884 

20 

52 

1912 

8 

11 

50 

90 

1885 

7 

31 

1913 

6 

5 

82 

640 

1886 

14 

5 

1914 

21 

5 

131 

480 

1887 

13 

71 

1915 

14 

11 

84 

330 

1888 

13 

35 

1916 

13 

1 

40 

16 

1889 

3 

3 

1890 

14 

14 

1891 

39 

107 

1892 

26 

81 

662 


MODERN    ECONOMIC   TENDENCIES 


The  figures  as  to  bank-failures  are  so  erratic  as  to  signify 
little  in  their  variations  from  year  to  year;  but  they  show 
plainly  that  the  panic  of  1893  was  the  worst  ever  experienced, 
so  far  as  bank-failures  are  concerned.  They  also  afford  positive 
evidence  that  those  who  operate  the  banks  either  do  not  know 
how  to  run  them,  or  that  they  are  incapable  of  learning  from 
experience.  An  average  breakage  of  16.7  banks  per  hundred 
million  people  per  annum,  maintained  over  a  period  of  half 
a  century,  and  ending  in  1914  with  a  rate  of  breakage  23  per 
cent  higher  than  this  average,  does  not  look  like  progress  in 
intelligence,  science  of  finance,  or  civilized  consideration  toward 
others,  such  as  one  has  a  right  to  expect  from  American  college- 
bred  men.  Is  it  a  case  of  the  wrong  people  in  the  saddle,  or 
merely  a  wrong  system?1 

TABLE  75 

NEW  YORK  CLEARING  HOUSE,  1854  TO  1916 
Average  Daily  Clearings  per  Capita  of  Population 


1854 

$0.72 

1870 

$2.35 

1886 

$1.88 

1902 

$3.10 

1855 

0.64 

1871 

2.39 

1887 

1.93 

1903 

2.89 

1856 

0.79 

1872 

2.69 

1888 

1.68 

1904 

2.38 

1857 

0.93 

1873 

2.76 

1889 

1.67 

1905 

3.61 

1858 

0.52 

1874 

.73 

1890 

1.95 

1906 

4.01 

1859 

0.68 

1875 

.85 

1891 

1.74 

1907 

3.60 

1860 

0.75 

1876 

.54 

1892 

1.81 

1908 

2.72 

1861 

0.60 

1877 

.63 

1893 

1.70 

1909 

3.61 

1862 

0.68 

1878 

.54 

1894 

1.17 

1910 

3.68 

1863 

1.44 

1879 

.67 

1895 

1.33 

1911 

3.25 

1864 

2.27 

1880 

2.42 

1896 

1.36 

1912 

3.34 

1865 

2.42 

1881 

3.10 

1897 

1.43 

1913 

3.32 

1866 

2.62 

1882 

2.88 

1898 

1.78 

1914 

2.99 

1867 

2.55 

1883 

2.45 

1899 

2.53 

1915 

2.97 

1868 

2.48 

1884 

2.01 

1900 

2.24 

1916 

4.70 

1869 

3.21 

1885 

1.46 

1901 

3.27 

Another  possible  indicator  of  periods  of  panic  or  prosperity 
is  to  be  found  in  the  volume  of  bank-clearings  per  capita.  Those 

*As  a  matter  of  fact,  this  phenomenon  of  continual  failures  of  banks 
is  merely  our  old  friend — a  deficit  in  employment — cropping  out  again 
in  strange  form.  The  current  creation  of  a  supply  of  new  banks  which 
are  unable  to  secure  business  enough  to  stay  alive,  or  which,  succeeding 
in  that,  inevitably  drive  others  to  the  wall,  is  just  as  natural  a  con- 
comitant of  the  presence  of  commercial  militarism  as  is  a  bread-line. 


PANICS  AND   CRISES  663 

for  New  York  City  are  displayed  in  Table  75.  They  are  sub- 
ject to  the  objection  that  they  are  expressed  in  dollars,  for  the 
value  of  the  dollar  for  life-support  varies  considerably  during 
the  sixty-three  years  covered  by  the  table.  Nevertheless,  they 
reveal  the  major  disturbances,  namely : 

(1)  The  panic  of  1857,  the  effect  of  which  appeared  only 
by  1858; 

(2)  The  outbreak  of  the  Civil  War,  before  recovery  from 
this  panic  was  complete; 

(3)  The  marked  stimulation  of  trade  by  the  War,  beginning 
in  1863  and  culminating  only  in  1869; 

(4)  The  Panic  of  1873,  again  visible  only  by  1874,  which 
still  left  clearings  three  times  as  great  (in  valuation)   as  did 
that  of  1857; 

(5)  The  culmination  of  "prosperity"  again  by  1881,  followed 

by 

(6)  The  protracted  recession  which  lasted  until  1898,  when 

(7)  The  Spanish  War  gave  matters  a  fresh  impulse  which 
culminated  only  in  1906.     The  retraction  due  to  the  panic  of 
1907,  while  severe,  yet  contracted  the  face-value  of  these  clear- 
ings only  to  a  minimum  which  was  still  five  times  as  great  as 
that  of  1857.    Finally  came 

(8)  The  impulse  due  to  the  Great  War  of  1914,  which  boosted 
clearings  in  1916  to  the  highest  point  shown  by  the  entire 
table. 

Another  measure  of  crises  and  panics  may  be  found  in  the 
receiverships  of  railroads.  Table  76  gives  the  data  as  to  roads 
passing  into  receivers'  hands  during  the  fiscal  year  stated,  in 
proportion  to  population.  It  is  taken  from  Bradstreet's  Journal 
for  Jan.  13,  1917,  quoting  from  the  Railway-Age  Gazette. 
Here  again  the  figures  indicate  that  the  crisis  of  1893  was  a 
more  severe  one  than  any  other.  While  this  may  be  true  for 
comparisons  with  crises  preceding  1893,  for  later  ones  it  must 
be  remembered  that  since  1893  the  "industrials"  have  increas- 
ingly shared  with  the  railroads  the  honor  of  being  a  football 
of  speculation,  and  of  enjoying  periodic  sojourns  in  the  sani- 
tariums maintained  by  the  courts  and  receivers  for  the  re- 
cuperation of  their  exhausted  finances. 

In  this  light,  and  with  particular  reference  to  the  date 
as  to  miles  and  valuations  involved,  the  "Silent  Panic"  of  1914, 
regarding  which  so  little  was  said  by  the  writers  representing 


664 


MODERN  ECONOMIC  TENDENCIES 


the  commercialists,  appears  as  a  much  more  important  affair 
than  the  panic  of  1907,  the  dramatic  aspects  of  which  brought 
it  much  more  prominently  before  the  public  eye. 

TABLE  76 

RAILWAY  RECEIVERSHIPS 
In  Proportion  to  Population.     1876  to  1916 


Number 
of  Roads 

Miles  of 

Stocks 

Number 
of  Roads 

Miles  of 

Stocks 

Year 

per 
Hundred 
Million 

Road  per 
Ten 
Million 

and 
Bonds 
Involved, 

Year 

per 
Hundred 
Million 

Road  per 
Ten 
Million 

and 
Bonds 
Involved, 

of  Popu- 
lation 

of  Popu- 
lation 

per 
Capita 

of  Popu- 
lation 

of  Popu- 
lation 

per 
Capita 

1876 

92 

1464 

$10.26 

1897 

25 

212 

$1.28 

1877 

81 

779 

4.72 

1898 

24 

281 

1.88 

1878 

56 

485 

1.93 

1899 

13 

136 

0.70 

1879 

24 

225 

0.80 

1900 

21 

153 

1.02 

1880 

26 

176 

2.80 

1901 

5 

9 

0.02 

1881 

10 

21 

0.07 

1902 

6 

35 

0.07 

1882 

23 

173 

0.74 

1903 

11 

28 

0.23 

1883 

20 

369 

2.01 

1904 

10 

91 

0.44 

1884 

67 

1995 

12.94 

1905 

12 

429 

2.10 

1885 

78 

1478 

6.82 

1906 

7 

24 

0.64 

1886 

22 

311 

1.22 

1907 

8 

36 

0.16 

1887 

15 

177 

1.53 

1908 

27 

902 

6.72 

1888 

36 

541 

3.09 

1909 

5.5 

95 

0.86 

1889 

36 

617 

1.58 

1910 

7.6 

80 

0.56 

1890 

41 

471 

1.67 

1911 

5.3 

278 

2.25 

1891 

40 

336 

1.31 

1912 

13.6 

395 

1.90 

1892 

55 

1602 

5.45 

1913 

17.5 

926 

4.91 

1893 

111 

4382 

26.60 

1914 

22 

426 

2.01 

1894 

56 

1029 

5.80 

1915 

12 

1994 

10.59 

1895 

44 

587 

5.30 

1916 

9 

432 

2.02 

1896 

48 

767 

3.88 

Fractional  versus  Fundamental  Crises. — The  explanation 
of  this  is  simple.  The  panics  previous  to  1914  were  all  more 
or  less  due  to  failure  in  merely  a  single  feature  of  the  com- 
mercial system,  namely,  its  credit-currency;  and  for  this  either 
the  government  or  the  people  might  be  held  responsible.  But 
the  crisis  of  1914 — for  one  could  hardly  call  it  a  panic — was 
the  first  instance  of  a  breakdown  due  solely  to  the  fundamental 


PANICS  AND   CRISES  665 

defects  of  the  entire  commercial  system;  that  is  to  say,  due  to 
the  expansion  of  commercial  costs  against  the  purchasing-power 
of  the  Ultimate  Consumer,  upon  a  national  scale  at  once,  until 
the  latter  broke  down  simultaneously  in  all  lines  of  trade.  For 
this  reason  it  is  the  commercial  system  alone  which  might  be 
held  responsible  for  it.  Hence  the  awed  silence.2 

Activity  in  Wall  Street. — Another  indicator  of  crises  might 
lie  in  the  volume  of  transactions  in  stock-exchange.  But  here 
arises  the  difficulty  that  stock  is  active  both  during  good  times 
and  in  panics.  When  times  are  dull  and  hard,  stocks  sell  in 
small  volume,  it  is  true;  but  during  panic  they  often  sell  off 
in  larger  volume,  if  at  lower  prices,  than  during  good  times. 
Stocks  are  often  "dull  but  strong,"  with  small  sales  at  high 
prices;  and  sometimes  "dull  and  weak,"  with  small  sales  at 
low  prices. 

Nevertheless,  the  volume  of  sales  on  the  New  York  Stock 
Exchange  is  given  in  Table  77,  to  show  what  it  may.  The 
statistics  most  easily  available  are  published  in  terms  of  shares, 
as  to  stocks,  but  of  par  value  as  to  bonds.  In  order  to  aggre- 
gate stocks  with  bonds  as  a  single  item  it  has  therefore  been 
assumed,  in  Table  77,  that  a  sale  of  fifty-dollars'  worth  of 
bonds  was  the  equivalent  of  a  sale  of  one  share  of  stock. 
Since  the  bond-sales,  roughly  speaking,  amount  to  only  about 
one-tenth  of  those  of  stocks,  with  fluctuations  in  price  rela- 
tively less  marked,  this  plan  will  arouse  no  objection.  It  is 
followed  merely  because  sales  sometimes  run  to  bonds  and 

zThe  "Silent  Panic"  of  1914  was  in  reality  not  a  panic  at  all, 
but  a  slowly  gathering  crisis.  There  were  numerous  expressions  of 
commercial  confidence  on  the  part  of  business-organizations  published 
at  this  time.  Yet  stocks  were  far  below  par,  mills  and  railroads 
were  largely  shut  down  and  unemployment  was  obvious  as  never  before 
in  our  history.  The  New  York  Times  for  July  24,  1914,  a  week  before 
war  broke  out  and  about  five  days  before  anyone  in  this  country 
dreamed  that  war  would  occur,  publishes  the  following: 

"From  figures  compiled  by  Dow,  Jones  &  Co.  it  appears  that 
there  are  in  default  at  the  present  time  $551,000,000  of  railroad 
securities  in  this  country,  a  larger  total  than  has  before  existed  at 
one  time  since  the  panic  of  1893.  If  the  prospect  of  further  defaults 
before  the  close  of  this  year  are  realized  the  total  will  be  increased 
by  at  least  $72,000,000  more."  .  .  .  Even  the  most  careless  investor 
is  coming  to  realize  that  a  bond  is  not  necessarily  a  bond,  in  his 
understanding  of  that  word." 


666 


MODERN  ECONOMIC  TENDENCIES 


sometimes  to  stocks,  so  that  the  records  as  to  either  one  alone 
would  be  misleading. 

TABLE  77 

STOCKS  AND  BONDS — VOLUME  OF  SALES  PER  CAPITA  OF  POPULATION 
(From  the  Commercial  and  Financial  Chronicle) 


Year 

Shares 

Year 

Shares 

Year 

Shares 

Year 

Shares 

Year 

Shares 

1892 

1.43 

1897 

1.20 

1902 

2.60 

1907 

2.36 

1912 

1.51 

1893 

1.25 

1898 

1.78 

1903 

2.16 

1908 

2.47 

1913 

0.96 

1894 

0.82 

1899 

2.58 

1904 

2.52 

1909 

2.67 

1914 

0.58 

1895 

1.10 

1900 

1.97 

1905 

3.39 

1910 

1.92 

1915 

1.91 

1896 

0.91 

1901 

3.67 

1906 

3.48 

1911 

1.54 

1916 



As  to  prices  of  stocks,  those  are  a  much  better  indicator  as 
to  volume  of  credit  and  intensity  of  crisis  than  any  other,  in 
that  they  are  exceedingly  sensitive  in  their  fluctuations.  The 
trouble  with  them  lies  in  the  uncertainty  as  to  their  outstanding 
volume,  which  is  changing  all  the  time  by  issue  and  retirement. 

Since  the  current  volume  of  issue  is  balanced  at  all  times 
against,  and  is  determined  solely  by,  the  ability  of  the  public 
to  absorb,  therefore,  as  soon  as  stocks  fall  in  price,  this  current 
rate  of  issue  is  checked;  and  this  checks,  in  turn,  the  further 
drop  in  prices.  Conversely,  as  soon  as  stocks  command  high 
prices  all  manner  of  new  securities  are  immediately  launched. 
These  help  to  absorb  the  buying  power  and  arrest  somewhat 
the  further  rise  in  prices. 

Indeed,  this  eventually  becomes  the  sole  force  available  for 
arresting  and  reversing  the  indefinite  rise  in  price  of  securities. 
It  is  literally  true  that  when  stocks  are  booming  the  engravers 
and  printers  of  securities  become  so  overworked  and  pre-en- 
gaged, upon  the  job  of  flooding  the  market  with  such  paper, 
that  this  limited  physical  possibility  of  getting  out  new  certif- 
icates itself  serves  as  the  limiting  control — and  the  only  visible 
one — of  this  process  of  "making  money"  out  of  the  public. 

Thus  it  must  become  clear  that,  however  the  volume  of  securi- 
ties may  vary  or  however  the  times  may  be  good  or  bad,  stocks 
will  always  tend  to  gravitate  in  price,  through  this  automatic 
acceleration  or  retardation  of  the  rate  of  issue,  toward  a  medium 


PANICS   AND   CRISES  667 

market-price,  neither  high  enough  to  accelerate  new  issues  un- 
duly nor  low  enough  to  retard  them  below  the  normal  rate. 
The  rate  of  issue  will  tend  to  swing  first  above  and  then  below 
this  normal  or  average  rate;  but  as  it  swings  on  either  side 
it  will  meet  an  increasing  tendency  to  return,  in  as  stable 
equilibrium  as  a  pendulum. 

The  portion  since  1890  of  Fig.  1,  Chapter  V,  shows  plainly 
this  pendulum-action.  The  period  previous  to  1890  was  em- 
ployed in  getting  up  speed  of  issue,  into  equilibrium  with  the 
rapidly  advancing  ability  of  the  people  to  absorb.  This  ability 
having  once  been  overtaken,  further  history  must  consist  of 
periodic  swings  above  and  below  this  point  of  equilibrium.  In 
such  a  situation  the  only  indication  as  to  crises  which  is  afforded 
by  prices  of  stocks  lies  in  the  rate  of  their  rise  or  fall,  and  the 
times  of  reaching  maxima  or  minima  of  swing. 

Eeliable  information  as  to  these  (except  at  a  prohibitive  cost 
for  labor  of  compilation)  is  available  only  since  1911,  in  the 
index-number  published  by  The  Annalist,  which  is  based 
upon  the  average  price  of  fifty  selected  stocks — twenty-five  rail- 
roads and  twenty-five  industrials.  Even  in  this  brief  period 
appears  the  difficulty  of  fitting  any  system  of  statistics  ac- 
curately to  the  constantly  changing  conditions  of  economic 
progress;  for,  since  the  number  of  railroads  is  virtually  sta- 
tionary (if  not  actually  decreasing  through  consolidation), 
while  the  number  of  industrials  is  steadily  and  rapidly  in- 
creasing, this  fifty-fifty  plan  for  an  index-number  common  to 
the  two,  which  might  have  been  fair  enough  in  1911,  is  already 
working  injustice  by  its  inadequate  representation  of  the  in- 
dustrials. However,  the  maxima  and  minima  of  this  index 
since  1911  are  given  in  Table  78,  for  what  they  may  be  worth. 

As  showing  the  way  in  which  the  rate  of  issue  of  new  securi- 
ties responds  to  high  prices  the  following  is  quoted  from 
Bradstreet's  Journal  for  July  8,  1916,  as  to  the  result  of  the 
prolonged  high  level  of  stock-prices  which  prevailed  from 
October,  1915,  to  November,  1916,  interrupted  only  by  a  slight 
lapse  (in  April,  1916)  to  the  relatively  high  minimum  of 
index-number  83 : 

"Listings  of  securities  at  the  New  York  Stock  Exchange 
during  the  first  six  months  of  1916  reached  unprecedented 
figures.  According  to  the  Wall  Street  Journal,  the  stocks 


668 


MODERN   ECONOMIC   TENDENCIES 


and  bonds  admitted  to  quotation  and  dealings  of  that  in- 
stitution in  that  period  aggregated  $1,452,444,950  in  par 
value,  as  compared  with  listings  during  the  entire  year 
1915  of  $1,179,200,000.  The  only  full  year  in  the  history 
of  the  Exchange  in  which  the  total  listings  exceeded  those 
just  shown  for  the  last  six  months  was  1912,  when  the  securi- 
ties added  to  the  stock  and  bond  list  amounted  to  $1,816,- 
000,000." 

TABLE  78 
MAXIMA  AND  MINIMA  IN  STOCK  PRICES,  1911  TO  1917 


Character  of  Apex 

Date 

Index  Price 

Maximum         

June,            1911 

82 

Minimum  

September,  1911 

73 

Maximum 

October,       1912 

84 

Minimum  

December,  1914 

60 

u 

February,     1915 

60 

Maximum 

October        1915 

92 

Minimum   

April,            1916 

83 

Maximum  

November,  1916 

100 

Minimum  * 

July,            1917 

80 

1  Date  of  closing  the  table. 

The  Silent  Crisis  of  1914.— Table  78  is  also  eloquent  as 
to  the  serious  character  of  the  crisis  of  1914.  Although  the 
minimum  in  stock-prices  was  not  reached  until  after  the  open- 
ing of  the  Great  War,  wherefore  it  was  universally  attributed 
to  the  war  in  entirety,  yet  the  striking  fact  is  that  by  July  first, 
1914,  at  which  time  not  one  person  in  a  million  anticipated  the 
approach  of  war,  stocks  had  already  fallen  to  65.  From  October, 
1912,  long  before  the  Serbian  assassination,  until  July,  1914, 
occurred  a  steady  decline  from  the  maximum  of  84;  and  this 
continued,  still  without  appreciable  stimulus  from  rumor  of 
war,  until,  by  the  third  week  in  July,  1914,  it  had  touched  60, 
a  low  figure  probably  not  exceeded  or  attained  in  any  earlier 
crisis. 

Just  at  the  close  of  the  month,  as  the  realization  of  impend- 
ing war  broke  upon  public  consciousness,  stocks  fell  to  a  point 
far  below  60;  but  this  final  collapse  through  war-panic  has 
been  eliminated  from  Table  78,  by  confining  the  record  to  the 
true  peace-crisis  minimum  of  60.  That  is  to  say,  60  was  the 


PANICS   AND    CRISES  669 

minimum  actually  attained  without  the  aid  of  war.  But  how 
much  lower  the  stagnation  of  our  commercial  system  might  have 
been  carried  by  its  own  inherent  weakness,  had  not  the  war 
intervened,  will  never  be  known.  There  was  no  visible  sign 
of  its  automatic  arrest  before  the  war  caught  it. 

That  the  author  is  not  alone  in  regarding  1914  as  a  serious 
panic-year  may  be  judged  from  the  following,  taken  from  The 
Annalist  for  January  25,  1915: 

"Both  in  number  and  in  aggregate  liabilities  1914  was 
the  record-year  for  commercial  mortality  [failures],  and  the 
average  liabilities,  $19,579,000,  has  been  exceeded  only  in  two 
or  three  preceding  years — the  last  time  in  1893,  when  the 
average  was  $22,751,000." 

But  1914  is  to  be  remembered  not  merely  for  its  intensity  of 
crisis.  Emphasis  is  laid  upon  it  here  because  it  was  the  first 
instance  in  which  the  crisis  was  due  purely  to  a  phenomenon 
which  had  increasingly  entered  all  earlier  panics,  and  which  is 
fated  in  the  future — now  that  defects  in  the  currency-system 
have  been  eliminated — to  be  the  controlling  factor  in  the  destiny 
of  our  civilization.  This  phenomenon  is  the  arrest  of  industry 
by  paralysis  of  public  pur  chasing -power,  through  prices  inflated 
by  the  accumulating  burden  of  interest-bearing  securities  and 
by  the  expanding  costs  of  competition. 

The  Economic  Detonator. — When  the  economic  evolution 
which  has  been  traced  in  these  pages  over  the  last  century 
shall  have  continued  to  its  critical  point,  to  the  exploding  of  the 
most  gigantic  magazine  of  pent-up  social  energy  which  his- 
tory has  ever  recorded — which  must  surely  occur  unless  reason 
intervenes  with  measures  sufficiently  drastic  to  prevent — it  will 
be  found  that  the  detonator  of  the  charge  has  been  a  final 
sudden  collapse  of  traffic  which  had  too  long  been  charged  all 
it  could  bear — but  which  had  given  no  striking  sign  of  stress, 
though  sagging  slowly,  because  stimulated  and  intimidated  by 
an  unfounded  and  barren  commercial  optimism.  But  the  ex- 
plosion itself  will  consist  chiefly  in  a  sudden  collapse  of  world- 
credit. 

Upon  a  few  days'  notice  virtually  every  mill  and  railroad 
will  have  to  shut  down,  not  because  no  one  wants  its  output, 
nor  because  no  one  wishes  to  work,  but  because  the  business- 
world  has  suddenly  lost  its  circulating -medium.  Personal  or 


670  MODERN   ECONOMIC  TENDENCIES 

socialistic  anarchy,  which  of  itself  can  never  be  a  prime  mover 
of  revolution,  will  then  be  released,  by  a  sudden  famine  in  the 
midst  of  our  richest  cities,  into  activity  and  supremacy.  Bol- 
shevism will  raise  its  head  in  congested  Manhattan  as  it  has 
never  had  basis  for  rising  in  sparse  Kussia,  nor  even  in 
phlegmatic  Germany.4 

*  Should  it  be  thought  that  this  view  of  the  inevitable  result  of  our 
uncontrollably  growing  intensity  of  commercial  competition  is  too  pes- 
simistic, due  to  the  too  astigmatic  vision  of  a  student,  perhaps  the 
following  expression  of  the  same  general  opinion,  coming  from  the 
very  heart  of  commercialistic  circles,  may  be  found  reassuring.  The 
Annalist  for  June  7,  1915,  prints  on  its  outer  title-page  the  following 
"scare-head'7  in  large  letters,  as  calling  the  reader's  attention  to 
the  most  important  thing  in  the  paper: 

"A  MOVEMENT  FOE  LESS  COMPETITION  AND  MOKE  TRADE." 
The  article  in  the  body  of  the  text  thus  indicated  says: 

"No  one  put  it  in  just  that  way,  but  the  manufacturers  and 
exporters  who  appeared  before  the  Federal  Trade  Commission  at  their 
initial  hearings  in  New  York  in  the  latter  part  of  last  week  all  had 
uppermost  in  their  minds  the  same  question.  They  must  have  had, 
for  they  all  took  the  same  mental  attitude  when  they  began  to  make 
suggestions. ' ' 

In  this  connection  Mr.  John  D.  Ryan,  president  of  the  Amalgamated 
Copper  Company  and  head  of  the  National  Foreign  Trade  Council,  is 
reported  as  saying: 

"I  long  ago  came  to  the  conclusion  that  this  country,  which  is 
the  great  storehouse  of  national  resources  of  the  world,  has  since 
the  beginning,  practically  thrown  away  its  substance.  It  has  robbed 
itself  of  its  mines,  its  forests,  its  soil.  It  has  sold  its  natural 
resources  in  competition  with  itself,  one  forest-tract  with  another, 
one  mine  with  another,  one  farm  with  another,  in  the  severest  and 
bitterest  kind  of  competition  anywhere  in  the  world.  It  seems  to 
me  that  this  is  the  greatest  economic  mistake  that  this  country  has 
ever  made,  and  it  continues  down  to  this  day." 

Yet  Mr.  Ryan  failed  to  mention  the  greatest  natural  treasure  of  all 
which  America  has  wantonly  wasted,  and  that  is  the  energy  for  co- 
operative interaction  between  her  tens  of  millions  of  men  and  women, 
now  unreleased  and  ingrowing  into  bitter  disloyalty.  Nor  did  any  of 
these  attendants  at  this  meeting  (which  was  in  reality  one  of  protest 
against  the  folly  of  the  Sherman  anti-trust  law)  place  the  responsibility 
for  this  ' '  greatest  economic  mistake ' '  where  it  rightfully  belongs — 
on  the  professional  economists  of  our  universities,  who  have  always 
had  at  hand  in  their  libraries  ample  statistics  to  prove  the  folly  of 
commercial  competition,  yet  who  have  never  appeared  before  the  public 
in  a  united  and  courageous  condemnation  of  the  anti-trust  movement, 
if  nothing  more. 


PANICS  AND   CRISES  671 

But  the  point  of  detonation  of  our  swelling  magazine  of 
pent-up  social  energy  has  not  yet  been  reached.  Actual  history 
switched  off,  in  August,  1914,  from  further  economic  evolution 
to  a  much  needed  readjustment  of  our  foreign  political  rela- 
tions. All  the  domestic  forces  of  social  progress  and  reaction 
were  temporarily  submerged  in  the  importance  of  the  titanic 
struggle  across  the  Atlantic.  The  stock-exchanges  were  closed 
for  six  months,  and  by  the  time  that  they  had  re-opened  the 
tremendous  governmental  issues  of  credit  abroad,  based  upon 
patriotism,  had  already  begun  to  exert  their  vivifying  effect, 
through  huge  purchases  of  goods  here  for  export. 

So  stocks  refused  to  sell  off  below  the  figures  of  July,  1914, 
and  rose  rapidly  instead  to  93  by  October,  1915.  Then  they 
fell  slowly  to  83  in  July,  1916,  and  rose  rapidly  again  to  100 
in  November,  1916. 

After  that  date  they  fell  slowly,  under  the  effect  of  volumi- 
nous issues  of  new  credit-instruments  incidental  in  the  supply 
of  munitions,  and  under  the  depressing  effect  of  the  approach 
of  the  United  States  to  actual  war,  until  mid-November  of 
1917,  when  they  reached  a  minimum,  slightly  above  80. 

This  figure  may  confidently  be  expected  to  be  a  minimum,  for 
inevitably  the  quite  unprecedented  rate  of  issue  of  governmental 
war-credits  inaugurated  by  our  actual  entrance  into  the  war, 
amounting  to  seven  billions  for  the  first  single  item,  with  others 
of  similar  magnitude  to  follow,  must  soon  have  its  effect  in 
such  a  stimulation  of  commercialism  that  the  resultant  period 
of  prosperity  to  follow  must  far  outshadow  any  puny  expan- 
sions of  the  past,  based  upon  such  petty  wars  as  the  Franco- 
Prussian,  the  American  Civil  and  the  Spanish-Cuban.  So  far 
as  history  has  become  available,  up  to  the  closing  of  these  pages, 
this  expectation  has  been  fully  realized. 


CHAPTER  XXII 

MISCELLANY 

THE  foregoing  comprises  all  of  the  factors  essential  to  form- 
ing a  complete  working-structure  of  modern  dynamic  society. 
Working  from  this  as  a  basis,  all  social  problems  of  the  day 
may  be  understood. 

But  it  is  still  necessary,  nevertheless,  in  order  to  complete  the 
statement  of  modern  economic  tendencies  in  terms  of  the  ideas 
now  prevalent  with  the  man-in-the-street,  to  review  some  social 
topics  which  are  not  themselves  essential  nor  basic  in  character, 
but  which  are  commonly  regarded  as  being  such.  Of  these  the 
first  is 

Capital  and  Labor 

The  idea  that  we  are  approaching  some  sort  of  a  severe 
economic  crisis  cannot  be  suggested  to  the  average  person,  even 
if  technically  educated  in  social  science,  without  his  replying: 
"Ah,  yes.  Capital  and  labor."  Yet,  as  a  matter  of  fact,  and  as 
must  be  plain  from  all  that  has  preceded  herein,  neither  with 
the  crisis  itself,  nor  with  the  method  of  its  approach,  has  the 
contest  between  capital  and  labor  anything  appreciable  to  do. 

For  this  contest  has  now  prevailed  continuously  for  centuries 
— certainly  ever  since  the  medieval  trades-guilds  arose  as  an 
answer  to  the  pressure  exerted  upon  the  free  cities  and  burghers 
by  their  political  lords,  elevating  Gog  and  Magog  to  their 
majestic  thrones.  During  the  four  or  five  centuries  since  then 
the  situation  has  been  one  of  continuous  deadlock.  The  current 
result  has  been  merely  to  adjust  wages  here  and  there,  up  or 
down,  in  keeping  with  the  rising  or  falling  cost  of  living;  and 
this  is  still  the  sole  function  of  all  strikes,  lock-outs,  etc. 

But  nothing  basic  nor  final  has  been  settled.  The  situation 
is  substantially  what  it  was  four  centuries  ago. 

Obviously  all  this  past  friction  between  capital  and  labor 

672 


MISCELLANY  673 

cannot  have  accomplished  anything  toward  the  permanent  bet- 
terment of  labor,  nor  toward  a  permanent  solution  of  the 
economic  problem,  else  we  should  not  now  have  an  acute  social 
problem,  which  is  plainly  approaching  the  critical  stage,  rather 
than  approaching  solution.  Instead,  we  should  have  observed 
a  gradual  amelioration  of  poverty,  and  the  evaporation  of  the 
economic  topic  from  our  public  debate. 

Nor,  from  the  point  of  view  of  those  who  believe  in  the 
betterment  of  labor  by  the  elevation  of  wages,  through  pressure 
upon  the  employer  to  grant  more  pay,  can  anything  have  been 
accomplished  in  that  line  by  all  this  strife,  unless  the  endless 
struggle  between  labor  and  capital  can  be  seen  to  have  relatively 
impoverished  the  employer  and  enriched  labor. 

Yet  it  is  because  exactly  the  opposite  from  this  is  broadly 
true  that  we  are  now  devoting  more  attention  to  economic  prob- 
lems than  ever  before  in  human  history.  While  wages  have 
risen  recently  at  a  rate  exceeding  the  fondest  dreams  of  the 
agitator  of  a  generation  ago,  agitation  is  still  more  active  to-day 
than  ever  before,  because  it  is  obvious  that  labor  is  not  win- 
ning. However  labor  may  be  enjoying  higher  wages,  it  is  un- 
questionable that  the  wealth  of  the  employ  ing -class  has  increased 
far,  far  faster  still,  while  the  purchasing-power  of  the  wage  has 
fallen  relatively  to  productivity. 

But  it  is  not  the  purpose  here  to  debate  the  efforts  of  organ- 
ized labor  from  the  point  of  view  of  class-consciousness,  in 
order  to  ascertain  which  class  has  won  the  more  wealth,  nor 
by  exactly  what  degree.  It  is  our  prime  purpose,  indeed,  to 
throw  all  such  futile  debate  into  the  background,  by  emphasizing 
the  larger  interests  of  all  citizens  in  the  problem  viewed  as  a 
whole.  For  this  purpose  it  is  sufficient  to  note  that  no 
principle  of  right  or  wrong  has  ever  been  involved — and  hence 
never  could  have  been  settled — by  all  this  bitter  struggle  be- 
tween labor  and  capital.  Hence  there  can  be  no  ultimate  victory 
for  either  side. 

The  whole  history  of  capital  and  labor  corroborates  this  view. 
Centuries  of  struggle  between  the  two  have  not  yet  evolved  for 
the  good  of  future  generations  a  single  resultant  basic  principle 
of  wages.  Not  a  clause  has  been  incorporated  in  our  constitu- 
tional law  as  perpetuating  the  undying  rights  of  either  labor 
or  capital.  Not  a  single  standard  has  been  planted  where  it 
will  stay. 


674  MODERN    ECONOMIC   TENDENCIES 

For  generations  such  expression  as  "a  fair  wage"  or  "the 
laborer  is  worthy  of  his  hire"  have  been  bandied  about  in  vain. 
The  struggle  remains  now  the  petty,  sordid  one  it  was  in  the 
first  place:  To  see  which  side  can  get  the  most  money — with 
the  result  that  the  relative  division  between  the  two  seems  to 
be  substantially  that  which  it  has  been  throughout  the  last 
five  centuries. 

What  was  considered  a  fair  wage,  as  to  figure,  fifty  years 
ago,  would  make  a  walking-delegate  weep  to-day.  What  is 
considered  a  usual  wage  to-day  would  have  bankrupted  every 
employer  in  the  prosperous  times  succeeding  the  Civil  War. 
But  the  relative  purchasing-power  of  the  two  wage-figures  has 
not  changed  in  any  like  degree. 

There  is  no  disposition  here  to  minimize  or  deride  labor's 
sore  need  for  relief.  It  is  fully  recognized  that  many  wage- 
earners  are  suffering  a  hardship  far  more  drastic  than  too  little 
sugar  in  their  coffee.  The  point  is  that  the  strife  for  higher 
wages  does  not  even  touch,  let  alone  ameliorate,  these  drastic 
hardships.  It  only  increases  them,  by  raising  prices  which  wage- 
earners  must  pay. 

Even  if  the  wage-earners  could  succeed  in  elevating  wages 
to  thrice  what  they  are  now,  they  would  be  only  worse  off  than 
now;  for  prices  would  then  be  five  or  six  times  as  high  as  now, 
and  the  deficit  in  employment  be  far  worse  than  now.  The 
pressure  upon  them  then  to  take  a  beggar's  crust,  or  leave  it, 
would  be  heavier  still  than  now. 

It  is  unquestionably  true  that  the  organization  of  labor  for 
this  endless  struggle  with  capitalism  has  accomplished  some 
incidental  results  of  value  to  those  organized,  in  improved  hours 
and  conditions  of  labor.  But  so  far  as  distribution  of  wealth 
is  concerned  it  has  accomplished  nothing,  except  to  make  or- 
ganized labor  slightly  poorer  in  purchasing-power,  and  unorgan- 
ized labor  very  much  so. 

Moreover,  even  in  this  the  labor-unions  have  served  rather 
as  mediums  for  expression  and  communication  than  as  instru- 
ments of  penetration  toward  any  definite  goal.  As  all  the  con- 
ditions of  life  for  the  well-to-do  have  been  ameliorated  by  in- 
ventive progress,  as  the  volume  of  printed  matter  issued  has 
increased  by  leaps  and  bounds,  and  as  opportunities  for  amuse- 
ment, recreation,  education  and  travel  have  broadened,  the  con- 
ditions surrounding  labor  in  the  larger  factories  have  been 


MISCELLANY  675 

improved  m  some  respects.  But  this  improvement  has  come 
entirely  through  the  action  of  ethical  forces.  So  far  as  labor's 
fight  against  capital  for  better  wages  is  concerned,  labor's  con- 
dition has  become  steadily  worse,  relatively  speaking. 

Moreover,  the  improvement  in  labor's  conditions  of  work  must 
be  viewed  against  a  proper  perspective.  Things  have  been 
bettered,  usually,  only  as  they  became  so  outrageously  worse 
than  what  the  rest  of  society  was  enjoying  that  the  factory- 
administration  became  ashamed. 

Thus,  one  of  our  large  factories  best  known  for  its  remark- 
able welfare-work  has  an  arrangement  whereby  any  girl  in  the 
place  may  leave  her  work  in  the  afternoon,  by  trolley,  for  a 
comfortable  country-club  maintained  by  the  factory.  There 
she  may  secure  a  night's  lodging  for  a  nickel,  enjoy  the  fresh 
air  and  quiet,  or  engage  in  tennis,  golf  or  a  barn-dance  in  the 
evening  (the  men's  club  being  less  than  a  mile  away),  and 
then  trolley  back  in  the  morning  at  the  cost  of  a  third  nickel! 

How  wonderful  are  modern  opportunities!  How  philan- 
thropic are  modern  employers! 

Yet,  upon  stopping  to  think  of  it,  this  girl  has  thus  had 
presented  to  her  by  her  employer  (at  the  expense  of  the  Con- 
sumer, who  is  paying  for  what  this  factory  puts  forth  several 
times  its  natural  price,  and  with  a  rate  of  pay  going  to  the 
employer  for  which  any  scientist  or  biologist  or  physician  would 
be  glad  to  devote  his  every  hour  to  aiding  human  life)  only 
what  her  grandmother  enjoyed  nearly  every  night  of  her  life, 
at  home — fresh  air,  quiet  and  country-fun,  such  as  her  day 
afforded  to  anyone! 

Yet,  under  commercialism,  this  factory-girl  is  in  unusual 
luck.  Fewer  and  fewer  working-people  can  enjoy  such  privi- 
leges. The  factory-managers  and  settlement-workers  may  strive 
as  they  will,  yet  commercial  forces,  which  are  vastly  more  pow- 
erful than  they,  are  shutting  ten  people  off  from  natural  life, 
by  congesting  them  in  cities  more  densely,  by  increasing  un- 
employment and  by  rising  prices,  while  one  is  being  rescued 
by  welfare-work.  The  whole  of  our  vaunted  progress  in  wel- 
fare-work consists  merely  in  getting  back  for  the  slaves  to 
modern  commercialism,  and  presenting  to  them  as  a  humiliating 
gift,  some  small  fraction  of  those  natural  enjoyments  of  which 
we  deprived  them  when  we  pinned  our  faith  to  ownership-in- 


676 


MODERN   ECONOMIC   TENDENCIES 


industry  as  the  guiding  policy  in  economics,  and  to  profits  as 
the  emolument  with  a  halo. 


TABLE  79 
GROWTH  OP  STRIKES  AND  LOCK-OUTS,  1881  TO  1905 


Year 

Strikes  per 
Million  of 
Population 

Lock-outs 
per  Million 
of 
Population 

Average 
Strikers 
per 
Strike 

Strikers  per 
Thousand  of 
Population 

Employees 
Idle  from 
Both  Causes 
per  1000  of 
Population 

1881 

9.2 

0.12 

215 

1.96 

2.53 

1882 

8.6 

•  .  .  • 

266 

2.29 

•  ... 

1883 

8.8 

«... 

255 

2.26 

.... 

1884 

8.0 



265 

2.12 



1885 

11.4 

0.88 

246 

2.81 

4^56 

1886 

24.7 

2.42 

284 

7.04 

.... 

1887 

24.3 

.... 

190 

4.62 

.... 

1888 

15.0 

•  .  .  • 

114 

1.71 

.... 

1889 

17.4 

.... 

191 

3.32 

.... 

1890 

29.1 

1.02 

156 

4.53 

5.93 

1891 

26.7 

.... 

143 

3.81 

.... 

1892 

19.8 

.... 

126 

2.50 

.... 

1893 

19.5 

.... 

149 

2.91 

.... 

1894 

19.7 

.... 

374 

7.40 

1.01 

1895 

17.4 

0.57 

235 

4.11 

5.84 

1896 

14.5 

.... 

179 

2.59 

.... 

1897 

14.9 

.... 

309 

4.60 

.... 

1898 

14.3 

0.57 

172 

2.47 

.... 

1899 

24.0 

.... 

172 

4.11 



1900 

23.3 

0.79 

225 

5.24 

7^44 

1901 

37.6 

1.03 

136 

5.10 

7.25 

1902 

40.0 

0.98 

175 

6.98 

8.73 

1903 

43.3 

1.91 

152 

6.60 

9.77 

1904 

28.1 

1.36 

163 

4.58 

6.99 

1905 

24.8 

1.30 

85 

2.10 

3.60 

Statistical. — Statistics  as  to  the  struggle  between  labor  and 
its  employers  throw  little  light  upon  the  situation,  except  to 
indicate  in  general  its  unchangeableness.  What  data  of  a  na- 
tional sort  are  available  are  set  forth  in  Table  79.  They  extend 
only  down  to  the  year  1905.  but  they  exhibit  clearly  these  fol- 
lowing tendencies: 


MISCELLANY  677 

(1)  The  number  of  strikes  per  capita   (second  column)   is 
fairly  steadily  upon  the  increase. 

(2)  The  average  size  of  strike  (fourth  column)  is  as  steadily 
upon  the  decrease. 

(3)  The  average  number  of  strikers  per  unit  of  population 
(fifth  column)  consequently  remains  substantially  constant. 

In  these  respects  these  figures  corroborate  our  conclusions 
from  quite  independent  sources  of  information,  namely,  that 
the  number  of  establishments  for  the  employment  of  labor  was 
increasing,  in  proportion  to  the  population,  indicating  a  de- 
centralization of  industry;  yet  that  the  contentiousness  be- 
tween the  men  and  these  employers  tended  to  remain  constant. 

In  the  final  explosion  toward  which  all  this  reckless  accumu- 
lation of  social  instability  appears  to  be  leading  us,  undoubtedly 
the  various  organizations  of  labor  will  play  an  important  part, 
after  the  explosion  has  been  detonated  by  some  other  factor. 
But  that  part  will  be  a  secondary  side-issue,  not  a  controlling 
function.  It  will  be  a  destructive,  not  a  constructive  policy. 
It  will  be  a  disappearing-villain's  role,  and  not  a  curtain-hero's 
fate. 

When  the  revolution  has  been  completed  the  battle  will  have 
proven  not  to  be  one  in  which  the  prime  contending  parties 
were  capitalism  versus  labor,  but  the  great  mass  of  now  un- 
organized Ultimate  Consumers  on  the  one  hand,  prevailing 
ultimately,  through  whatever  instrumentalities  they  may  be  able 
to  lay  their  hands  on,  against  the  huge  inefficient  anarchy  of 
commercialism,  as  displayed  by  competing  corporations,  corner- 
groceries,  labor-unions  and  political  parties,  on  the  other.  It 
will  be  society  as  a  whole  against  a  horde  of  its  own  discordant 
parts. 

In  the  present  approach  towards  this  crisis,  as  in  its  final 
outcome,  these  following  facts  will  prove  of  aid  in  guiding  one's 
thoughts,  even  if  the  facts  be  negative  ones.  The  positive  ones 
will  be  found  in  the  next  chapter. 

(1)  The  struggle  will  not  be  over  wages,  but  over  food  and 
employment;  nor  will  it  result  in  any  settlement  upon  a  higher 
wage  than  now  (except  as  the  general  scale  of  both  wages  and 
prices  will  continue  to  rise,  as  now),  nor  upon  any  fixed  wage 
at  all,  nor  upon  any  permanent  principle  of  adjusting  wages — 
except  as  the  definition  of  the  natural,  competitive  wage,  as 
defined  herein,  might  be  regarded  as  a  principle.  After  the 


678  MODERN   ECONOMIC   TENDENCIES 

smoke  of  conflict  has  drifted  away  and  poise  has  been  regained, 
wages  will  be  determined  as  now — by  a  separate  bargain  with 
each  workman — whenever  any  bargain  at  all  is  necessary. 

For  when  the  employer  has  ceased  to  be  an  owning  and 
profit-seeking  employer,  becoming  merely  a  fellow  wage-earner, 
who  distributes  wages  in  a  market  in  which  there  is  no  deficit 
in  employment,  and  no  dilution  of  the  purchasing-power  of  the 
dollar,  all  discontent  over  wages  will  have  ceased.  In  any  given 
line  of  work  wages  will  then  be  as  stable  and  unquestioned  as 
is  now  the  price  of  postage-stamps. 

The  working-classes,  in  those  efforts  towards  self-betterment 
which  we  hope  and  believe  will  never  cease,  will  then  never  think 
of  the  wage-question  as  an  opportunity  for  profitable  strife, 
any  more  than  the  employer  will  then  ever  regard  prices  in 
that  light.  They  will  then  never  strike  for  higher  wages,  be- 
cause every  man  will  then  appreciate  instinctively  what  he 
should  realize  now,  namely,  that  every  increase  in  wages  comes 
not  from  the  employer,  but  from  other  wage-earners,  in  the  form 
of  higher  prices. 

Every  workingman  should  realize  to-day  that  every  strike  is 
directed,  not  against  the  employer-class — which  has  thriven  and 
grown  tremendously  rich  upon  decades  of  strikes  and  rising 
wages — but  against  the  wage-earners  in  other  trades,  who  are 
the  ones  who  pay  all  wages  and  who,  upon  these  same  decades 
of  strikes  and  rising  wages,  have  grown  steadily  poorer  and 
poorer.  There  is  no  scab  to  equal  a  striker.  For  he  is  robbing 
his  fellow-workingmen  not  only  of  the  volume  of  employment 
which  they  otherwise  might  enjoy,  but  also  of  the  money  which 
they  have  earned  in  the  past,  by  raising  the  prices  which  they 
must  pay. 

(2)  The  crisis  will  not  be  precipitated  by  the  wage-earners 
themselves,  organized  or  unorganized,  acting  either  by  "general 
strike"  or  as  a  mob.  After  it  has  been  precipitated  by  other 
causes,  lying  within  the  commercial  system  itself,  then  both 
sorts  of  labor — organized  and  unorganized — will  take  an  active 
part  (if  past  history  is  to  be  any  guide)  in  tearing  the  struc- 
ture of  the  commercial  system  into  such  debris  that  no  one 
will  ever  again  be  sufficiently  reckless  to  recommend  its  re- 
construction. 

Organized  labor  will  do  this  through  frightful  tyranny,  de- 
liberately planned.  Unorganized  labor  will  accomplish  the  same 


MISCELLANY  679 

end  subconsciously,  through  hideous  mob-violence.  But  neither 
of  these  social  forces  will  possess  any  slightest  creative  power 
for  the  erection  of  permanent  new  institutions.  Nor  can  these 
institutions  be  erected  by  any  other  social  forces,  until  the  con- 
tentiousness of  wage-hungry  labor  shall  have  finally  exhausted 
itself  in  an  extremity  of  anarchy  which  will  have  destroyed  the 
upper  classes  by  the  thousands,  and  labor  itself  by  the  tens 
of  millions,  of  lives. 

For  it  is  only  the  people  as  a  whole  which  can  create  institu- 
tions for  its  own  permanent  protection.  If  a  minority  acts, 
as  a  dictator,  it  must  act  in  the  name  of  all,  in  order  to  succeed. 

(3)  The  final  result  of  the  revolutionary  cataclysm  will  be 
to  blast  away  forever  the  ancient  feud  between  organized  labor 
and  organized  capitalism — not  by  molding  the  dispute  into  a 
further  endless  compromise  between  the  two,  nor  by  perma- 
nent victory  for  either  side;  but  by  casting  the  whole  question 
forever  into  oblivion,  leaving  on  the  field  of  present  battle 
merely  a  memory  of  past  conflict — just  as  the  skeletons  of  two 
stags  who  died  of  starvation,  with  antlers  inextricably  inter- 
locked, remain  as  a  monument  to  their  fruitless,  suicidal  enmity 
and  strife. 

A  more  constructive  picture  of  how  all  this  is  to  come  about, 
in  outline  at  least,  will  be  given  in  the  succeeding  chapters  of 
this  book.  In  the  meantime  our  examination  of  current  economic 
delusions  must  be  continued. 


The  Minimum  Wage 

From  this  same  viewpoint  the  hopes  of  the  advocates  of  the 
minimum  wage,  as  a  key  to  unlock  our  economic  problems,  or 
even  as  a  means  for  their  partial  amelioration,  may  be  quickly 
put  one  side.  For  the  minimum  wage  is  not  at  all  a  novel 
institution,  to  be  expected  only  as  the  result  of  legislation  in 
the  future.  There  has  always  been  a  minimum  wage,  estab- 
lished and  maintained  by  a  law  superior  (so  long  as  com- 
mercialism survives)  to  every  human  statute  and  constitution. 

That  minimum  wage  is  zero.  So  long  as  every  employer  is 
left  free  to  hire  or  discharge  labor  at  will — and  to  deny  this 
freedom,  under  commercialism,  would  amount  to  a  confiscation 
of  property  upon  an  overwhelming  scale — just  so  long  the 
minimum  wage  prevailing  in  any  and  every  class  of  labor,  no 


680  MODERN   ECONOMIC   TENDENCIES 

matter  what  may  be  on  the  statute-book,  will  be  just  nothing 
at  all  per  week ! 

Indeed,  the  reader  who  followed  the  chapter  upon  Unem- 
ployment need  not  be  told  that,  in  every  walk  of  life  dependent 
upon  exertion  for  an  income,  this  minimum  wage  now  actually 
prevails  at  all  times,  over  a  proportion  of  the  population  therein 
which  is  predetermined  by  a  natural  law  rigidly  based  upon 
the  economic  conditions  prevailing  at  the  time.  This  law 
neither  workingman  nor  employer  nor  legislator  is  competent 
to  disregard,  annul  or  reverse. 

This  being  so,  it  would  seem  that  the  agitation  for  a  legally 
minimum  wage,  which  has  just  now  been  dropped  among  the 
greater  interests  of  the  war,  would  best  never  be  renewed. 
Even  as  an  expression  of  public  opinion  it  can  never  have  more 
than  microscopic  value — nothing  in  comparison  with  its  cost 
in  debate  necessary  to  settle  upon  the  figures  which  may  be 
regarded  as  a  fair  minimum,  in  each  of  the  many  diverse  con- 
ditions of  labor,  and  then  to  readjust  those  figures  every  few 
months  into  consonance  with  the  rapidly  varying  cost  of  living 
— while  the  legal  precedent  established  would  be  mischievous 
in  the  extreme.  As  a  source  of  endless  quibble  the  task  would 
be  more  complex  and  hopeless  than  the  tariff — regarding  which 
God  grant  that  there  may  never  be  another  public  debate ! 

Automatic  Involuntariness  again. — For  it  is  not  such  a 
simple  question  as  that  of  possibly  influencing  by  public  pres- 
sure some  employer  or  other  into  paying  higher  wages.  It  is 
a  question  as  to  what  good  it  will  do  the  workman  when  done. 
For  the  relation  between  wages  and  their  purchasing-power,  and 
hence  the  real  wage,  has  not  been  left  to  the  whim  of  the  in- 
dividual employer.  It  is  beyond  the  ability  of  either  employer 
or  laborer  to  affect  this  real  wage. 

The  futility  of  labor's  trying  to  better  its  condition  by 
raising  wages,  by  strikes,  has  already  been  pointed  out.  It  is 
equally  futile  to  have  them  raised  either  by  the  voluntary  act 
of  the  employer,  or  through  his  coercion  into  doing  so  by  law. 

The  trouble  is  not  that  wages  cannot  be  raised.  That  is 
more  than  easy;  for,  under  commercialism,  wages  insist  upon 
rising  steadily  without  anyone's  help — always  carrying  up  prices 
more  rapidly  than  themselves.  The  trouble  is  that  a  rise  in 
wages  always  means  a  decrease  in  their  purchasing-power.  The 


MISCELLANY  681 

effective  wage  falls  as  the  figure  on  the  pay-envelope  rises.  This 
law  applies  as  relentlessly  to  the  "minimum  wage"  as  to  any 
other. 

For  instance,  the  report  of  a  recent  federal  commission  of 
labor  mentions  the  gain  in  wages  secured  by  a  certain  large  coal- 
mine strike  as  being  $4,500,000.  But  the  increase  in  price  of 
coal  to  its  Ultimate  Consumers,  due  to  the  same  cause,  was 
$13,000,000!  Who  paid  the  $8,500,000  of  difference,  lost  by 
the  public  each  year? 

The  worJcingmen  of  the  country  and  their  families!  They 
paid  it  not  only  in  the  increased  cost  of  heating  their  homes, 
but  in  increased  cost  of  food,  clothing,  shelter,  transportation, 
amusement  and  everything  else  into  which  the  cost  of  fuel 
enters  as  a  factor. 

Thus,  while  all  the  other  trades  of  the  land  were  thus  pay- 
ing the  coal-miners  their  increased  wages  (through  the  mine- 
owners  as  agents,  with  a  commission  of  $1.88  paid  to  said  agents 
in  addition  to  every  dollar  passed  through  to  the  miners),  these 
same  coal-miners  were  paying,  in  the  price  paid  for  clothing 
and  other  things  (and  upon  the  same  efficient  plan  for  the 
transfer  of  the  money)  the  increased  wages  for  textile  operatives 
won  by  the  Lawrence  (Mass.)  strike,  and  by  the  copper-miners 
in  northern  Michigan  and  Arizona  and  every  other  increase  in 
wage  in  every  line  of  labor  anywhere  in  the  land. 

Even  if  the  employers  had  consented  to  handle  all  these 
useless  cross-payments  of  wage-increase  for  nothing,  the  net 
result  to  the  workingman,  as  a  class,  must  have  been  exactly 
zero  gain — each  man  paying  just  a  dollar  more  across  the  shop- 
counter  for  each  additional  dollar  of  wages  received.  But  in 
actual  fact  people  do  not  transact  business  in  this  ideal  way. 
Moneys  are  not  handled  without  charge  therefor.  So,  after  all 
these  cross-payments  have  been  completed,  statistics  show  that 
labor  has  gotten  back  to  itself,  in  the  form  of  higher  wages, 
scarcely  more  than  one-third  of  what  it  put  in  in  the  form  of 
higher  prices! 

Part  of  the  other  two-thirds  has  been  lost  in  transit.  The 
remainder  goes  to  enrich  the  employer-class.  The  obvious  result 
of  two  generations  of  rising  wages,  sometimes  raised  volun- 
tarily but  usually  forced  up  by  unions  and  strikes,  has  been  the 
palpable  growth  of  discontent  amongst  the  wage-earners,  if  not 


682  MODERN   ECONOMIC   TENDENCIES 

their  actual  impoverishment,  with  an  astounding  rate  of  enrich- 
ment of  its  employers.  Yet  the  only  key  needed  for  unlocking 
this  paradox  is  attention  to  rising  prices. 

It  is  from  this  basis  that  the  question  of  the  minimum  wage 
must  be  viewed — even  if  we  discount,  for  the  moment,  what 
was  said  as  to  the  zero  wage.  Suppose  that  in  a  certain  line  of 
work  where  men  had  been  receiving  $3  per  day  the  law  enacts 
a  minimum  wage  of  $4.  What,  in  all  common  sense,  must  be 
the  result? 

When  the  men  apply  for  their  jobs  they  will  inevitably  be 
told  one  of  three  things,  namely: 

(1)  That  the  job  is  not  worth  $4,  and  that  arrangements 
are  therefore  being  made  to  do  it  by  machine — for  the  margin 
of  $1  would  immediately  induce  engineers  to  design,  and  em- 
ployers to  install,  machines  which  could  not  be  afforded  in  com- 
petition with  three-dollar  labor ;  or 

(2)  That  the  work  had  been  abandoned  altogether,  as  un- 
profitable; or 

(3)  That  all  employers  in  this  line  of  work  had  agreed  to 
accept  the  law,  to  raise  the  wage  to  $4,  and  to  elevate  the  price 
of  output  sufficiently  to  cover  the  increased  cost,  with  a  profit 
on  it  added. 

In  the  first  or  second  of  these  cases  the  workman  who  before 
was  discontented  only  because  of  a  fractional  deficit  in  his 
proper  income  now  loses  the  whole  of  it.  Thereupon  he  enters 
upon  that  career  of  degradation  which  is  inseparable  from 
unemployment,  into  the  laziness  of  the  tramp,  the  bitterness  of 
the  anarchist  or  the  vindictive  hypocrisy  of  the  criminal. 

In  the  third  case  the  time  is  short  until  prices  in  general  have 
advanced— for  the  minimum  wage,  to  be  worth  anything,  must 
apply  to  all  trades— sufficiently  so  that  the  $4  buys  not  merely 
no  more  than  the  $3  did  previously,  but  even  less  than  that. 
In  the  actual  history  of  America  during  the  last  two  generations, 
actual  progress  has  been  divided  between  these  three  processes 
fairly  evenly. 

Thus  the  enactment  of  a  statutory  minimum  wage  is  a 
decree  which  is  powerless  to  increase  the  purchasing-power  of 
any  workingman,  shop-girl,  etc.,  more  than  momentarily;  it  is 
sure  to  reduce  that  purchasing-power  ultimately  below  what  it 
was  before  the  decree;  and  meanwhile  it  sets  going  another 
of  our  many  futile  distractions  of  public  attention  away  from 


MISCELLANY  683 

the  real  issues  of  the  day,  to  the  waste  of  invaluable  time  in 
unending  discussions  of  unsolvable  problems,  like  the  tariff. 

For  the  whole  problem  of  the  economic  reformer,  it  must  be 
plain  from  all  which  has  preceded,  consists  in  the  maintenance 
of  a  proper  and  effective  rate  of  reform.  To  stand  still,  or 
even  to  proceed  slowly,  is  fatal.  To  lose  time  in  the  face  of 
the  rapidly  gathering  crisis  which  now  impends,  is  as  repre- 
hensible as  the  dawdling  of  a  military  commander  in  active 
campaign  in  the  face  of  an  approaching  enemy.  Every  hour 
is  precious.  For  there  is  no  line  of  human  progress  which 
is  advancing  with  anything  like  the  energy,  speed  and  accelera- 
tion with  which  commercialism  is  now  constantly  expanding. 

As  one  of  our  most  obvious  instances  of  not  merely  the  rate 
at  which  the  fruits  of  commercialism  are  ripening  before  our 
eyes,  but  of  that  relentless  incorrigibility  which  all  these 
phenomena  manifest,  let  us  turn  to  that  most  deadly  and  de- 
moralizing of  all  the  many  tragic  features  of  commercialism 
which  grace  what  we  are  pleased  to  term  our  peaceful  evolution 
of  civilization,  namely, 

Congestion  in  Cities. 

The  statistical  aspect  of  the  growth  of  cities  as  a  whole  has 
already  been  presented  earlier  in  this  work  (pages  362-365). 
The  very  interesting  topic  of  the  degree  and  rate  of  congestion 
of  population  within  certain  districts  within  the  cities,  called 
slums,  may  not  be  embarked  upon  here.  The  present  task  is 
merely  to  trace  economic  causes  of  modern  tendencies ;  and  slums 
are  effects,  not  causes. 

But  one  of  the  prime  causes  of  urban  congestion,  according 
to  an  all  but  universal  belief  which  asserts  itself  whenever 
discomfort  from  congestion  has  happened  to  make  itself  noticed, 
is  the  lack  of  more  subway,  elevated  or  trolley  cars  or  roads. 
Therefore  we  must  inquire  if  this  belief  be  well  founded. 

Has  urban  congestion  ever  been  remedied  in  the  past  by  the 
extension  of  transit-facilities?  If  not,  it  is  obvious  folly  to 
hope  for  remedy  in  the  future  in  this  direction. 

On  May  26,  1907,  the  New  York  Herald  published  a  sym- 
posium of  views  upon  this  matter  by  Mr.  Theodore  P.  Shonts, 
president  of  the  Interborough  and  official  of  other  transit- 
corporations,  Mr.  George  S.  Rice,  then  Chief  Engineer  of  the 


684  MODERN   ECONOMIC   TENDENCIES 

Rapid  Transit  Commission,  and  the  author.  In  the  author's 
contribution  was  included  a  brief  abstract  of  the  history  of 
New  York's  rapid-transit  facilities.  The  symposium  was  re- 
viewed and  abstracted  in  an  article  upon  "Congestion  in 
Cities"  appearing  in  The  Geographical  Review  for  April,  1917, 
from  which  a  portion  is  quoted  below  through  the  courtesy  of 
the  American  Geographical  Society. 

The  earliest  steps  toward  providing  New  York  with  urban 
transit  are  of  interest  as  having  been  inaugurated  during  the 
decade  preceding  the  census  of  1850,  which  has  been  selected 
as  the  starting-point  for  the  statistical  analyses  of  this  work. 
They  consisted  of  the  now  obsolete  horse-drawn  street-car,  and 
included  the  Harlem  road — which  still  survives,  partly  in  the 
tunnel  under  Murray  Hill  on  Fourth  Avenue  and  partly  in  the 
splendid  four-track  line  by  which  the  New  York  Central  and 
New  Haven  trains  gain  access  to  the  Grand  Central  Station. 
But  there  was  even  then  frequent  complaint  of  insufficient  ser- 
vice, and  the  papers  of  those  days  were  filled  with  many  a 
quip  and  cartoon  ridiculing  the  city's  discomfort  in  struggling 
up  and  down  town  by  means  of  horse-cars  and  omnibuses — at 
their  best,  in  fine  weather,  slow  and  noisy;  in  wet  weather 
most  disagreeable,  and  in  deep  snow  either  stationary  or  non- 
existent. 

To  quote  from  the  article  of  1907 : 

"During  the  sixties  the  pressure  for  something  better  than 
the  street-car  became  more  urgent;  but  ...  it  was  not  until 
1869  that  the  first  elevated  construction  was  undertaken.  This 
first  effort  was  limited  to  a  half-mile  of  experimental  track 
put  up  on  Greenwich  street;  but  its  apparent  success  led  to 
its  further  growth  into  a  genuine  road,  extending  from 
Battery  Place  to  Thirtieth  street,  the  embryo  of  the  present 
Ninth-avenue  line.  But  the  motive  power  was  by  cable,  from 
stationary  engines,  and  was  mechanically  a  failure.  By  1871 
it  had  been  virtually  abandoned  as  a  promise  of  relief.  The 
state  of  public  opinion  existing  at  this  time  is  shown  by  the 
following  editorial  remarks  appearing  in  the  Railroad  Gazette 
for  February,  1872 : 

"'That  the  city  of  New  York  is  sorely  in  need  of  greater 
facilities  for  transporting  its  people  to  and  fro  is  a  fact 
which  is  painfully  impressed  upon  all.  .  .  .  Every  person 


MISCELLANY 


685 


who  discusses  the  question  is  fully  satisfied  that  something 
must  be  done.' 

"This  editorial  might  have  been  written  just  as  oppor- 
tunely in  1892  or  1902  as  in  1872.  It  expresses  almost  ex- 
actly the  situation  in  New  York  city  to-day,  although  the 
transit-facilities  now  extend  almost  to  millions  where 
thirty-five  years  ago  they  compassed  thousands." 

It  might  be  added  to-day,  in  1917,  that  this  editorial  is 
just  as  timely  now,  ten  years  later  (during  which  decade  the 
transit-facilities  have  increased  fifty  per  cent),  as  it  was  in 
1907.  And  it  would  have  been  equally  timely  in  1852  or  1862. 

"During  1872  the  old  elevated  property  was  purchased  by 
a  new  organization  and  was  equipped  with  locomotives,  con- 
stituting the  first  really  successful  elevated  rapid  transit. 
The  traffic  of  this  road  during  the  succeeding  five  years,  within 
which  time  the  line  was  extended  to  Sixty-first  street,  in- 
creased as  follows : 

TABLE  80 
GROWTH  OP  ELEVATED  TRAFFIC,  1873  TO  1877 


Year 

Passengers 

Increase  (per  cent  per 
annum) 

1873 

640,000 

1874 

810,000 

27 

1875 

910,000 

12 

1876 

2,020,000 

122 

1877 

3,150,000 

56 

"These  figures  show  how  naturally  it  should  come  to  pass 
that  the  situation  by  1877  had  again  become  badly  congested. 
In  May  of  that  year  the  same  editorials  say : 

"  'The  elevated  road  has  now  all  the  traffic  it  can  accomo- 
date,  or  rather  a  little  more.  Many  have  to  stand  in  the 
cars  morning  and  evening,  and  no  more  trains  can  be  put  on/ 

"On  November  16,  1877,  the  Railroad  Gazette  remarks: 

"  'Where  so  recently  there  was  no  means  of  traveling  from 
Wall  Street  to  Central  Park  faster  than  horses  could  travel 


686  MODERN   ECONOMIC  TENDENCIES 

there  seems  likely  to  be  in  a  few  months  three  steam  rail- 
roads, all  within  a  belt  a  mile  wide.  The  question  then  will 
no  longer  be  how  people  can  get  up  and  down  in  the  city, 
but  how  the  three  railroads  can  get  traffic  enough  to  support 
them/ 

"Oh,  halcyon  dream !  "Within  less  than  seven  months  from 
that  date  the  Sixth  Avenue  line  was  opened,  and  this  is  the 
result  of  the  first  day's  'relief  of  congestion,  as  commented 
on  in  the  same  columns : 

"  'Most  notable  of  all,  perhaps,  was  the  amount  of  traffic, 
the  trains  appearing  to  be  generally  filled  at  some  point  of 
their  run,  and  that  not  only  in  the  morning  and  evening, 
but  also  in  the  middle  of  the  day.  Indeed,  about  noon  many 
were  standing  in  the  cars.' 

"Already  in  1881  trains  were  running  djuring  rush-hours 
under  a  headway  of  82  seconds  over  a  single  track,  and 
almost  all  of  the  additional  facilities  provided  during  suc- 
ceeding years  were  in  the  form  of  longer  trains.  Referring 
to  the  prospect  of  this  lengthening  of  the  train,  in  October, 
1885,  the  Gazette  remarks: 

"'A  large  number  of  passengers  who  now  have  to  stand 
up  for  a  considerable  distance  will  then  be  able  to  obtain 
the  seat  for  which  they  have  paid/ 

"Oh,  halycon  dream  again.  For  in  October,  1887,  only 
two  years  later,  the  same  sheet  feels  forced  to  remark : 

"  'The  chronic  overcrowding  of  the  elevated  railroads  of 
New  York  has  lately  called  forth  some  indignant  protests 
from  the  daily  press.' 

"That  was  the  situation  twenty  years  ago.  That  is  virtually 
the  situation  to-day,  except  that  it  has  become  steadily  worse. 
During  these  twenty  years  transit-facilities  have  increased  by 
several  fold — certainly  by  over  ten  per  cent  per  annum — 
although  the  population  has  increased  by  only  .  .  .  about 
four  per  cent  per  annum.  During  the  twenty  years  the  con- 
gestion has  decreased  not  one  iota.  Instead,  it  has  increased. 
...  In  the  light  of  history,  what  is  the  use  of  expecting 
relief  from  expanded  facilities?" 


MISCELLANY  687 

The  above  is  certainly  a  strange  record  of  alternating  and 
inconsistent  pessimism  and  optimism.  Certainly  by  a  genera- 
tion ago  it  must  have  become  plain  that  expansion  of  transit- 
facilities  was  not  relieving  congestion.  Yet  intelligent,  college- 
bred  men  kept  on  believing  that  it  would  do  so !  Whence  they 
derived  their  faith  it  is  impossible  to  surmise! 

Nor  is  the  Railway  Gazette  quoted  here  to  serve  as  a  butt 
for  derision,  but  rather  to  show  how  the  ablest  sources  of  public 
opinion  find  themselves  deceived  upon  economic  questions  and 
unguided  by  their  college-education;  for  this  journal  has  ever 
stood  as  a  leading  one  in  its  profession.  Nor  can  it  receive 
the  blame  alone,  for  Mr.  Shonts,  who  stands  before  the  public 
as  the  highest  person  in  authority  over  its  transit-system,  after 
taking  the  care  to  review  briefly  the  statistical  history  of  the 
traffic,  can  find  nothing  more  perspicacious  to  offer  as  a  con- 
clusion, in  this  symposium  of  1907,  than  the  following : 

"It  would  therefore  appear  that  the  solution  of  this  problem 
must  lie  in  the  creation  of  additional  rapid-transit  lines  of 
travel." 

To  which  opinion,  since  Mr.  Shonts  has  a  considerable  per- 
sonal interest  in  promoting  the  possible  volume  of  traffic,  the 
public  will  add  a  grain  of  salt  before  taking. 

At  the  same  time  Chief  Engineer  Rice  committed  himself 
still  more  unequivocally  as  follows: 

"The  rapid-transit  problem  in  New  York  can  be  solved. 
There  is  nothing  in  the  situation  to  justify  the  prophecy 
that  New  York  must  always  suffer,  or  long  continue  to  suffer, 
inconvenience  in  its  traffic-facilities." 

Yet  he  himself  adds  later  a  paragraph  which  is  italicized  here 
only  because  the  editor  of  the  Herald  italicized  it,  in  entirety, 
as  expressing  the  gist  of  the  whole  symposium,  as  follows: 

"It  is  one  of  the  paradoxes  of  our  work  that  as  we  increase 
the  facilities  of  transportation  we  add  to  its  volume  in  a 
surprising  ratio.  In  a  sens.e  we  are  therefore  working  in  a 
circle.  As  quickly  as  it  becomes  possible  to  ride  about  the 
city  at  an  increased  rate  of  speed,  and  with  the  opening  up 
of  new  lines  of  transit,  business  increases,  population  is  at- 
tracted to  the  city,  and  the  problem  is  vastly  complicated." 


688  MODERN   ECONOMIC   TENDENCIES 

If  this  broad  fact  does  not  "justify  the  prophecy  that  New 
York  must  always  suffer  inconvenience  in  its  traffic-facilities/' 
it  is  hard  to  say  what  conclusion  it  does  enforce !  The  situa- 
tion to-day,  ten  years  after  this  was  written,  is  certainly  far 
worse.  The  way  in  which  human  beings  allow  themselves  to 
be  handled  like  cattle  in  the  present  subway-trains  will  surpass 
the  understanding  of  polite  people  of  1950. 

Nor  is  this  due  merely  to  the  fact  that  additional  subways  are 
all  but  completed,  soon  to  relieve  the  situation — as  Mr.  Shonts 
is  now  urging  the  people  to  believe,  in  notices  posted  in  his  cars. 
The  crowding  was  just  as  beastlike  several  years  ago  as  now.  It 
has  been  at  all  times  as  bad  as  civilization  could  endure.  It  has 
stood  as  a  denial  of  the  fact  that  we  were  civilized. 

During  these  recent  years  the  subway  trains  have  been  length- 
ened from  seven  to  ten  coaches  each,  while  the  elevated  lines  have 
been  given  a  third  track,  carrying  express-trains  downtown  in  the 
morning  and  uptown  in  the  afternoon.  Yet  there  has  been  no 
relief.  The  prospect  which  Mr.  Shonts  holds  out  to  the  public 
that  the  opening  of  the  new  subways,  upon  which  the  city  is 
spending  six  times  the  cost  of  the  present  system,  will  soon 
relieve  the  crush,  is  the  same  old  halcyon  dream  which  has  been 
wafted  from  the  pipe-smoke  of  the  transit-owners  ever  since  the 
days  of  the  Mexican  War.  In  the  light  of  these  facts,  with 
which  these  transit-owners  must  be  more  conversant  than  anyone 
else,  it  is  impossible  to  have  faith  in  the  sincerity  of  these  utterly 
unfounded  representations. 

Indeed,  the  figures  as  to  the  growth  of  the  city's  transit- 
facilities,  as  set  forth  in  a  sheet  issued  by  the  Interborough 
Kapid  Transit  Company  itself,  under  date  of  December  20,  1916, 
are  given  in  Table  81.  The  situation  which  we  are  emphasizing 
here  is  admitted  in  the  very  title  of  the  sheet,  which  reads :  "How 
New  York  Overtakes  its  New  Transit- Facilities." 

On  July  30  of  that  same  year  the  New  York  Times  quotes,  as 
from  an  official  utterance  of  the  Interborough  Eapid  Transit 
Company,  with  its  own  headlines,  the  following : 

"New  York's  Crowds  Swamp  All  Transit 

Interborough  Says  No  Growth  of  Facilities  Can  Keep  Pace  with 

City's  Demands.     No  Relief  in  Third  Tracks 

Elevated  Traffic  Back  to  Maximum  within  a  Month, 

While  Subway  Jam  Increases  Steadily 


MISCELLANY 


689 


No  matter  how  fast  rapid-transit  lines  are  built  in  New  York 
City,  the  transportation  needs  of  the  population  always 
seem  to  keep  ahead  of  them." 

And  on  October  22  of  the  same  year  the  same  journal  prints 
the  facts  again,  this  time  presenting  them  in  graphical  form, 
putting  the  rides  per  capita  per  annum  as  356  and  the  cost  of 
carfare  to  each  inhabitant,  on  the  average,  as  $17.46  per  annum. 

TABLE  81 
GROWTH  OF  NEW  YORK'S  TRANSIT  FACILITIES,  1872  TO  1916 


Year 

State  of  Development  of  the  Transit 
Facilities 

Total  Rides 
(Millions) 

Rides 
per  Capita 
per  Annum 

1872 

Horse-cars  only  

139 

147 

1872 
1906 

First  yearof  Elevated  with  Locomotives 
(3d,  6th  and  9th  avenue  lines  only) 
First  year  of  Subway  

251 

837     • 

215 

298 

1916 

First  year  of  3d  track  on  the  Elevated 
lines  

1201 

332 

In  the  autumn  of  1917  the  posters  in  the  subway  itself  an- 
nounced that  the  Interborough  traffic  is  now  over  two  millions 
of  passengers  daily,  with  an  average  increase,  as  compared  with 
only  a  year  ago,  of  over  two  hundred  thousand  passengers  daily 
— an  annual  increase  of  ten  per  cent!  Yet  the  city  is  now 
growing  at  an  average  rate  of  only  about  four  per  cent  per 
annum.  If  the  growth  in  demand  for  transit  is  not  running 
rapidly  and  acceleratingly  away  from  both  population  and 
transit-facilities,  it  is  difficult  to  say  what  it  is  which  is  hap- 
pening. 

The  simple  truth  as  to  all  this  is  so  simple,  in  the  light  of 
all  which  has  preceded,  that  it  needs  be  mentioned  only  tersely. 
The  principle  underlying  all  congestion  of  transit-facilities  is 
that  it  is  commercialism  which  creates  congestion;  transit- 
facilities  merely  permit  it.  Therefore,  the  more  transit-facilities 
we  may  build  the  more  congestion,  and  not  the  less,  we  shall 
be  sure  to  experience. 


690  MODERN   ECONOMIC   TENDENCIES 

Instead  of  its  being  true,  as  Mr.  Rice  says,  "there  is  nothing 
in  the  situation  to  justify  the  prophecy  that  New  York  must 
always  suffer,  or  long  continue  to  suffer,  inconvenience  in  its 
transit-facilities,"  the  handwriting  is  plain  upon  the  wall  that 
the  congestion  of  our  great  cities  promises  soon  to  form  one  of 
the  pivots  of  a  gigantic  crisis.  Although  this  crisis  will  doubt- 
less be  brought  to  a  head  by  other  factors,  yet,  when  once  here, 
its  most  tragic  aspect  will  center  about  the  utter  inability  of  a 
population  still  greater  than  now,  cooped  up  on  a  rocky  islet, 
to  get  food  in,  or  to  get  itself,  its  garbage  and  its  dead  horses 
out,  when  all  the  facilities  for  transportation  have  ceased  opera- 
tion, from  their  reliance  upon  a  collapsed  circulating-medium  of 
inflated  private  credit. 

Looking  over  the  platforms  upon  which  have  been  staged  the 
most  tragic  features  of  revolutions  in  past  history,  this  transit- 
situation  looks  as  much  like  the  one  which  the  present  generation 
is  building  for  itself  as  any.  The  recklessness  with  which  man 
has  stored  huge  magazines  of  highly  explosive  chemicals,  in  his 
preparation  for  war,  is  as  nothing  compared  with  the  recklessness 
with  which  populations  adequate  for  stocking  an  entire  nation, 
a  generation  or  so  ago,  are  now  being  compressed  within  limits 
unfit  for  supporting  one-tenth  their  numbers. 

The  Automobile. — In  this  staging  of  the  coming  crisis  by  the 
increasingly  acute  congestion  of  our  cities,  the  automobile  is 
playing  a  part  only  secondary  to  our  rail-borne  transit-systems. 
Yet  the  congestive  function  of  the  automobile  is  exerted  in  a 
manner  quite  different  from  that  of  the  rail.  The  rail-systems 
make  greater  and  greater  degrees  of  congestion  barely  tolerable 
for  the  poor.  The  automobile  makes  them  ever  increasingly 
pleasant  for  the  rich. 

That  is  to  say,  as  congestion  increases  it  augments  for  the 
well-to-do  the  pleasant  contrast  between  home  and  office,  while 
it  does  not  for  the  poor.  The  rich  no  longer  seek  residences 
within  transit-distance  of  their  offices,  but  settle,  instead,  upon 
country-estates  forty  miles  out.  At  the  same  time,  the  increasing 
congestion  increases  the  profitability  of  the  downtown  office.  At 
both  ends  the  rich  gain. 

But  not  so  the  poor.  They  bear  increasingly  the  burden  of  a 
congestion  against  which  even  the  rich  would  revolt,  were  the 
latter  not  relieved  by  the  automobile.  Thus  the  degree  of  con- 
gestion tolerable,  upon  the  average,  has  been  increased  by  the 


MISCELLANY  691 

automobile;  yet  of  this  growing  burden  the  poor  have  borne  an 
increasing  fraction,  as  the  automobile  has  become  more  powerful 
and  reliable. 

In  this  way  the  automobile  has  exerted  a  powerful  influence 
in  magnifying  the  contrast  between  rich  and  poor.  It  is  not 
merely  the  visible  contrast  in  comfort  between  him  who  rides 
and  him  who  walks,  but  the  contrast  between  one  who  finds  life 
tolerable  at  all  only  because  he  can  ride,  and  him  who,  because 
he  cannot  ride,  finds  life  all  but  impossible.  Those  who  see  in 
the  sentiments  of  the  poor  toward  the  automobile  only  malicious 
envy,  have  far  failed  to  grasp  all  the  forces  at  work. 

Social  Candor. — These  being  the  facts,  why  cannot  we  have 
them  recognized  with  a  little  frankness  and  sincerity  by  those 
who  control  our  transit-systems  ?  Or,  if  we  may  not  look  to  these 
for  anything  public-spirited  or  broad-minded,  then  why  not  by 
our  city-officials?  Are  they  too  shackled  by  commercialism? 

Or,  if  not  there,  then  why  not  by  our  teachers  of  political 
economy?  Does  the  paralyzing  poison  of  commercialism  pene- 
trate even  our  universities? 

What  is  the  matter  with  us  ?  Why,  in  the  language  of  one  of 
New  York's  most  prominent  divines,  must  educated  society  sit 
paralyzed,  in  the  face  of  this  approaching  crisis,  like  a  bird 
fascinated  by  a  snake?  Why  have  not  those  who  have  assumed 
all  too  lightly  the  very  grave  responsibility  of  guiding  public 
opinion,  and  especially  that  of  teaching  young  people  their  con- 
cepts of  citizenship,  long  ago  taught  plainly  and  emphatically 
that  the  line  of  progress  now  being  followed,  in  the  accelerative 
growth  of  every  feature  of  commercialism  (of  which  this  con- 
gestion in  cities  is  merely  one)  leads  straight  towards  cataclysm? 
There  is  sharp  and  heavy  blame  lying  somewhere. 

Incomes 

Another  topic  favorite  with  the  man-in-the-street  who  is  in- 
clined to  be  radical  is  that  of  swollen  incomes.  His  attention  is 
caught  by  the  great  size  of  some  incomes,  and  he  judges  from 
that  their  inequity.  He  often  believes  that  incomes  should  be 
limited  by  law.  The  legislators  on  both  sides  of  the  Atlantic 
have  embodied  this  belief  in  the  enactment  of  income-taxes 
which  are  yearly  becoming  more  drastic. 

But  this  is  the  same  mistake,  made  in  another  direction,  as  that 


692  MODERN   ECONOMIC   TENDENCIES 

of  the  socialist,  who  deems  wages  inequitable  merely  because  they 
are  small.  The  legislator,  who  is  usually  most  supercilious 
toward  the  socialist,  is  just  as  superficial  as  he,  and  more  so, 
when  it  comes  to  political  economy. 

While  it  is  true  that  it  is  disparity  of  wealth  which  is  the 
source  of  discontent,  and  while  it  is  true  that  our  larger  current 
incomes  are  inflated  to  the  point  of  absurdity,  yet  this  does  not 
mean  that  disparity  of  income  is  necessarily  inequitable.  It  is 
only  when  this  disparity  exceeds  that  of  the  individual  productive 
capacity  that  inequity  arises. 

That  is  to  say,  in  the  golden  age  of  pure  economic  justice  yet  to 
come,  incomes  will  not  be  leveled  into  equality.  As  men  differ 
in  productive  capacity  their  incomes  may,  and  should  be,  propor- 
tioned thereto,  without  inequity. 

But  human  beings  do  not  differ  by  any  means  so  widely  as  do 
modern  incomes.  As  one  compares  man  with  man  on,e  is  struck 
not  so  much  with  the  injustice,  as  with  the  absurdity  of  our 
present  gigantic  incomes.  They  make  such  a  laughable  matter 
of  any  pretense  that  they  represent  truly  the  differences  between 
man  and  man,  in  ability,  that  the  doctrine  cannot  long  survive. 

Talleyrand  is  reported  as  saying  of  Napoleon's  execution  of  the 
young  and  innocent  Due  d'Enghien :  "It  was  worse  than  a  crime ; 
it  was  a  blunder !"  The  inequity  of  the  modern  distribution  of 
wealth  has  far  surpassed  being  a  huge  injustice;  it  has  become 
the  biggest  and  grimmest  world-joke  ever  perpetrated.  An  in- 
stitution may  long  survive  recognition  as  a  tyranny,  but  it  cannot 
long  endure  being  a  crass  absurdity. 

In  the  Scientific  Monthly  for  October,  1916,  appears  an  article 
entitled:  "Our  National  Prosperity:  Distribution  of  Property 
and  Income,"  by  Charles  A.  Gilchrist,  in  which  he  says : 

"That  the  present  distribution  of  wealth  in  the  United  States 
is  exceedingly  unequal  is  yearly  becoming  more  and  more 
apparent  to  even  less  thoughtful  people.  The  question  of  the 
injustice  of  the  distribution  of  either  property  or  income,  or 
of  a  remedy  for  that  injustice,  is  not  here  at  stake.  Our  pur- 
pose is  to  present  graphically  the  spectacle  of  inequality  as  it 
exists,  and  its  relation  to  our  national  prosperity  of  which  we 
are  accustomed  to  boast." 

Mr.  Gilchrist  then  constructs  curves  showing  the  distribution 
of  property  and  income,  based  in  part  upon  the  work  of  Charles 
B.  Spahr,  "The  Present  Distribution  of  Wealth,"  already  quoted 


MISCELLANY  693 

in  this  book,  and  in  part  upon  the  figures  of  Scott  Nearing  in  his 
book  entitled  "Income."  The  foundation  of  all  are  the  data  col- 
lected by  the  government  in  connection  with  the  income-tax. 

His  conclusions  as  to  the  state  of  affairs,  even  so  far  back  as 
1890,  long  before  the  Spanish  War  had  given  its  modern  accel- 
eration to  commercialism,  are  these : 

"One  per  cent  of  the  people  own  more  than  the  remaining 
ninety-nine.  Think  of  it!  One  half  of  the  national  wealth 
practically  crossed  out,  as  far  as  national  prosperity  goes,  since 
it  is  the  property  of  but  one  per  cent  of  the  population !  Four- 
fifths  of  the  people  own  but  one-tenth  of  the  wealth!' 

He  then  constructs  a  curve  for  the  year  1913  from  the  data  of 
the  income-tax,  giving  incomes  in  terms  of  the  number  of  in- 
dividuals enjoying  them — the  few  having  much  and  the  many 
little.  That  is  to  say,  if  the  entire  adult  population  of  the 
United  States  (that  is,  those  concerning  whom  we  now  possess 
income-tax  data)  were  lined  up  in  a  single  rank,  with  each 
person  holding  vertically  upon  the  ground  before  him  a  wand 
the  height  of  which  represented,  to  some  suitable  scale,  his  in- 
come; and  if  we  suppose  these  individuals  assorted  so  as  to  put 
the  poorest  at  one  end  of  the  line  and  the  richest  at  the  other ; 
then  a  curve  drawn  through  the  upper  ends  of  all  these  wands 
would  have  the  general  shape  of  a  hyperbola. 

That  is  to  say,  at  the  "poor"  end  of  the  line  this  curve  would 
be  flattened  out  almost  into  a  straight  horizontal  line,  so  many 
would  there  be  with  small  incomes  almost  alike ;  but  not  quite  a 
straight  or  horizontal  line,  because  there  is  some  slight  difference 
in  income  between  each  two  contiguous  men.  But  at  the  other 
end  of  the  line,  at  the  "rich"  end,  the  curve  would  bend  upwardly 
until  it  became,  at  the  last  man,  almost  a  straight  vertical  line, 
so  much  would  each  individual  income  differ  from  the  next,  as 
one  passed  from  one  man  to  the  next  richer  one.1 

The  equation  for  this  curve  through  the  wand-ends  Mr. 
Gilchrist  finds  to  be 

xy2  =  a 

lit  must  not  be  forgotten  that  the  "poor"  end  of  this  line  stops, 
from  the  nature  of  the  data,  at  the  smallest  income  recorded  by  the 
income-tax  returns — $4000  for  a  married  man.  Hence  all  this  applies 
only  to  a  small  fraction  of  the  population — the  richest  fraction.  Yet 
it  shows  the  general  principle  of  the  distribution  of  wealth. 


694  MODERN   ECONOMIC   TENDENCIES 

It  shows  the  increase  in  wealth  from  man  to  man,  as  one  proceeds 
from  the  "poor"  end  to  the  "rich"  end,  as  itself  increasing 
gradually,  the  change  being  everywhere  smooth  and  gradual. 

Now  the  ambition  of  every  person  in  the  land  is  to  better  his 
position  in  this  line,  relatively  to  his  fellows.  This  is  the  whole- 
some tendency  in  human  nature  properly  called  rivalry  or 
emulation,  but  which  we  mistakenly  include  under  the  term  com- 
petition. The  steepness  of  the  hyperbolic  curve,  at  any  point, 
shows  how  much  is  to  be  attained  in  this  way,  in  increased  in- 
come, by  victory  over  the  next  man  ahead. 

At  the  "poor"  end  of  the  line — although  the  poorest  enjoys  an 
income  of  $4,000 — this  increase  in  income,  from  one  man  to  the 
next,  is  only  about  one  cent  per  man.  Amongst  the  really  poor, 
then  it  must  be  some  very  minute  fraction  of  a  cent.  Yet  at  the 
"rich"  end  of  the  line  it  is  $2,280  between  one  man  and  the  next ! 

Yet  even  here  we  have  only  a  part  of  the  truth.  For  the  data 
reveal,  not  the  income  of  each  individual,  but  incomes  of  whole 
groups  or  classes  of  individuals.  Therefore  the  maximum  dif- 
ference between  the  individuals  composing  the  richest  group 
must  be  considerably  greater  than  that  stated. 

Yet,  accepting  figures  as  they  stand,  the  situation,  as  Mr. 
Gilchrist  states  it,  is  this : 

"A  man  in  the  seventeenth  [or  richest]  group,  in  order  to 
raise  his  income  by  $2,280,  must  get  ahead  of  but  one  other 
man  in  the  race,  whereas  a  man  in  the  first  group  [the  poorest 
to  appear  in  the  income-tax  returns]  must  pass  some  228,000 
others  in  order  to  raise  his  income  by  a  like  amount.  It  all 
means  that  the  greater  a  man's  income  the  easier  it  is  for  him 
to  augment  it — a  state  of  affairs  curiously  incongruous,  since 
the  greater  his  income  the  less  need  for  him  to  augment  it. 

"But  this  is  the  principle  in  distribution  that  accounts  for 
the  enormous  inequalities  of  property.  It  is  what  Herbert 
Spencer  would  call  an  example  of  the  law  of  the  'multiplica- 
tion of  effects.'  Or  in  current  platitudes,  'nothing  succeeds 
like  success.'  It  would  seem  to  show  that  a  condition  even 
approaching  equality  was  one  of  unstable  equilibrium  and  that 
society  contains  within  itself  the  seeds  of  economic  destruction. 
We  do  not  assert  that  such  is  the  case,  for  there  may  be  other 
seeds  in  society  with  an  opposing  tendency;  but  such  opposing 
forces  are  not  now,  at  least,  in  evidence."  (Italics  mine.) 

A  condition  of  unstable  equilibrium  means  that  the  first  slight 
accidental  disturbance  will  lead  to  an  overturn  or  an  explosion. 


MISCELLANY  695 

Since  Mr.  Gilchrist  can  see  no  evidence  of  any  stabilizing  forces, 
we  fail  to  understand  his  reluctance  to  assert  frankly  and  em- 
phatically that  his  study  of  the  data  as  to  incomes  forces  one  to 
the  conclusion  that  an  overturn  or  explosion  of  society  is  im- 
minent and  inevitable,  unless  the  whole  principle  of  our  eco- 
nomic system  be  reformed. 

Vrhen  we  criticise  this  attitude  in  unqualified  terms  we  must 
not  be  misunderstood  as  disposed  to  criticise  Mr.  Gilchrist  in- 
dividually, because  in  its  adoption  he  is  merely  representative  of 
what  is  almost  universal  in  collegiate  sociology,  namely  intel- 
lectual timidity.  That  is  a  thing  quite  distinct  from  either 
physical  or  moral  cowardice,  but  it  is  none  the  less  undermining 
to  the  structure  of  society,  and  is  therefore  to  be  held  up  to 
public  execration. 

But  in  this  we  are  dealing  not  with  any  phenomenon  of  in- 
dividual psychology,  at  all,  but  with  one  so  universal  in  collegiate 
halls  that  it  must  be  recognized  as  an  institutional  defect  in  our 
form  of  educational  organization.  The  causes  of  this  defect  will 
be  treated  in  the  last  chapter. 

It  is  this  inequality  and  inequity  of  incomes,  with  the  natural 
desire  to  regain  or  approach  equalization,  of  course,  which  lies 
back  of  every  graduated  income-tax.  So  obvious  is  the  inequity 
of  our  present  distribution  of  wealth  that  it  is  instinctive  to 
attempt  to  counteract  it  by  sheer,  direct  force. 

But  taxing  out  some  minor  fraction  of  this  inequity  certainly 
can  never  bring  back  the  situation,  which  is  rotten  at  heart,  into 
true  equity.  Moreover,  society  having  once  decided  to  rely  upon 
the  commercial  system  for  its  very  existence,  it  must  permit  that 
system  to  live  its  selfish,  accumulative  life,  or  else  society  must 
be  ready  to  die  with  it.  We  cannot  build  an  economic  system 
upon  faith  in  selfishness,  as  the  only  reliable  human  sentiment, 
and  then  quarrel  with  those  who  live  up  to  our  faith. 

The  larger  incomes  cannot  be  taxed  into  anything  approaching 
equalization  without  the  removal  of  all  incentive  to  commercial 
enterprise.  It  is  not  that  such  a  tax  would  be  inequitable  to 
those  taxed,  but  that  it  would  harm  society  in  general,  by  col- 
lapsing its  supply  of  commercial  credit. 

It  is  not  that  a  graduated  income-tax  may  not  be  the  most 
equitable  means  for  meeting  governmental  expenditures  which 
amount,  as  now,  to  only  some  five  or  ten  per  cent  of  the  aggre- 
gate commercial  incomes.  It  is  that  the  imposition  of  any  tax 


696  MODERN  ECONOMIC   TENDENCIES 

such  as  would  be  competent  to  counteract  that  acquisition  of  huge 
fortunes  would  immediately  collapse  the  valuation  of  all  Wall- 
street  securities,  and  paralyze  all  production,  transportation  and 
consumption. 

Society  must  choose  between  commercialism  or  something 
better.  We  cannot  have  two  incompatible  economic  systems  side 
by  side.  We  tried  it  in  1830-60.  Conflict  became  inevitable.  If  we 
elect  to  rely  upon  interest-bearing  ownership-in-industry  as  our 
chief  source  of  circulating-medium,  and  upon  selfishness  as  the 
sole  psychic  motive  force,  then  we  must  accept  not  only  huge  for- 
tunes, but  indefinitely  swelling  fortunes,  as  an  incident  thereto. 

If,  on  the  other  hand,  we  depart  from  this  faith  we  must 
abandon  commercialism  altogether.  The  instant  we  show  sure 
national  signs  of  a  wavering  in  our  choice,  our  circulating- 
medium  will  collapse.  There  has  never  in  the  past  been  any 
system  of  state-bank  currency-notes,  greenbacks,  confederate  cur- 
rency, bimetallism  or  the  like  which  was  so  delicately  liable  to 
sudden  and  complete  collapse  in  valuation  as  is  our  present  huge 
accumulation  of  interest-bearing  securities. 

It  is  hardly  necessary  to  reassure  the  reader  here  that  this  book 
regards  all  these  huge  incomes  as  inequitable.  The  point  is  that 
you  cannot  have  your  cake  and  eat  it  too.  You  must  either  let 
commercialism  live  the  selfish,  sordid  life  of  apoplectic  greed 
which  alone  is  natural  to  it,  or  else  you  must  bid  farewell  to  it 
altogether.  You  cannot  tax  big  incomes  back  into  even  an  ap- 
proach to  moderation  and  parity — after  letting  all  the  injustice 
and  waste  involved  in  their  accumulation  proceed  untouched— 
that  the  whole  commercial  system  will  not  come  crashing  upon 
the  people's  heads. 

Any  such  a  policy  is  a  weak  closing  of  the  stable-door  after 
the  horse  has  been  stolen.  It  is  a  childish  attempt  to  unscramble 
the  eggs.  If  the  commercial  system  is  to  be  abolished — good ! 
But  it  must  be  done  by  deliberate,  conscious  plan — by  first  cut- 
ting out  the  roots  whence  these  big  fortunes  grow,  and  with 
some  adequate  substitute  provided  in  advance — rather  than  by  a 
blundering  effort  to  carve  off  by  inches,  surgically  and  vindic- 
tively, these  economic  hydra-heads  which  we  ourselves  have 
forced  into  existence,  by  our  daily  homage  to  the  spirit  of  com- 
mercialism at  the  altars  of  the  retail  shop-counters. 

One  might  as  sensibly  try  to  slice  up  an  inflated  balloon.  The 
first  slice  kills  the  job.  One  might  as  well  try  to  temper  the 


MISCELLANY  697 

tyranny  of  a  despot  by  a  gradual,  painless  assassination.  Emer- 
son says:  "If  you  strike  a  king,  kill!"  For  if  you  are  afraid  to 
strike  to  kill  you  would  far  better  accept,  with  your  forehead  on 
the  ground,  anything  he  chooses  to  hand  out  to  you. 

The  Census 

Equally  involved  in  this  responsibility  for  the  prediction,  and 
hence  the  softening,  of  coming  cataclysms,  from  the  basis  of  past 
history,  are  the  universities  and  the  census-bureau.  Hitherto  the 
census  has  been  regarded  as  merely  interesting.  But  from  now 
on  it  must  be  seen  to  be  vital.  If  there  be  any  weight  in  the 
idea  quoted  from  Condorcet  at  the  beginning  of  this  book, 
namely : 

"If  there  exists  a  science  of  predicting,  or  directing  or  of 
accelerating  the  progress  of  the  human  race,  the  history  of  its 
past  should  be  the  first  foundation  therefor" 

— which  idea  the  author  seconds  with  all  his  heart — then  the 
census-reports  must  assume  a  dignity  and  responsibility  for 
recording  that  past,  truly  and  frankly,  which  is  of  the  highest 
rank.  The  census-bureau  should  be  held  to  both  a  strict  and  a 
broad  sense  of  its  duty.  For  at  present  it  is  plainly  inclined  to 
lapse  from  what  should  be  its  first  duty,  namely,  a  display  of  the 
major  features  of  our  national  progress,  into  a  mistaken  loyalty 
to  microscopic  accuracy,  which  should  come  a  late  second  in 
relative  importance. 

For  if  the  future  guidance  of  this  great  nation,  or  internation, 
is  to  turn,  as  it  should,  upon  statistical  data  derived  from  our 
census-reports,  it  will  not  be  upon  any  super-exact  evaluation  of 
some  knife-edge  detail  that  decision  will  teeter,  but  upon  the 
broadest  sweeps  of  world-tendency.  Here  lies  the  duty  of  the 
census-bureau. 

By  the  year  1921  the  census  of  1920  will  have  recorded  forever 
whatever  knowledge  we  are  to  have  in  the  future  of  our  progress 
during  a  decade  which  has  comprised  the  biggest  and  most  sig- 
nificant social  changes  of  any  of  the  thirteen  decades  of  our 
national  existence.  On  the  data  as  to  these  changes  must  be 
based  our  planning  of  our  policies  for  1925  or  1930.  Therefore 
if  this  coming  census  shall  have  failed  to  cover  these  major  issues 
of  our  times  just  outlined,  including  the  enumeration  and  classi- 


698  MODERN    ECONOMIC   TENDENCIES 

fication  of  occupations  in  reference  to  commercialism,  and  of 
unemployment,  as  the  census  of  1910  has  failed  to  do,  the 
neglect  will  amount  to  a  national  catastrophe. 


Public  Ownership  and  Commercialism 

It  is  commonly  held,  throughout  a  wide  stratum  of  public 
opinion  which  has  already  lost  its  faith  in  commercialism,  yet 
without  crystallizing  upon  anything  better — being  in  this  much 
like  Kipling's  raw  recruit,  who  "  'ad  lost  'is  gutter-devil  and 
'adn't  found  'is  pride" — that  processes  are  now  at  work,  in  the 
slow  extension  of  governmental  ownership,  to  negative  this 
menacing  growth  of  commercialism.  Therefore,  although  no 
adequate  summary  of  the  topic  of  public  ownership  can  be 
given  here,  it  is  necessary  to  inquire  briefly:  Is  any  gradual 
abolition  of  commercialism  through  public  ownership  prac- 
ticable ? 

For  instance,  as  these  lines  are  being  written  the  daily  press 
announces  the  government's  prospective  expenditure  of  some 
fifty  millions,  as  a  war-measure,  upon  appliances  for  food- 
supply.  This  and  similar  military  precautions  taken  by  the 
American  and  British  governments  have  given  rise  to  a  wide- 
spread, but  unfounded,  belief  that  the  close  of  the  war  will  find 
the  world  a  long  stride  away  from  commercialism,  and  towards 
economic  co-operation  of  some  sort,  if  not  crass  socialism. 

But  we  fail  to  see  any  signs  of  such.  We  will  overlook,  for 
the  moment,  the  fact  that  these  are  purely  war-measures,  and 
that  the  invisible  government  embodied  in  commercialism, 
having  given  way  through  patriotism  while  the  war  was  in 
progress,  is  sure  to  swing  back  into  line,  when  once  peace  is 
declared,  with  an  irresistible  demand  that  it  now  have  a  free 
hand.  We  will  examine  here  only  the  immediate  effect  of  the 
act.  Does  it  result  in  even  a  temporary  reduction  in  the  volume 
of  commercialism? 

Not  in  the  least.  Suppose  this  fifty-million  move  to  be  car- 
ried out:  What  becomes  of  the  fifty  millions  paid  for  the 
food- facilities?  Does  anyone  suppose  that  it  will  remain  in 
the  hands  of  the  recipients,  in  the  form  of  hoarded  currency? 
For  then  alone  could  it  avoid  forming  a  basis  for  an  increase 
in  the  volume  of  commercialism— and  perhaps  not  even  then. 


MISCELLANY  699 

For  even  if  left  as  idle  bank-credit  it  would  still  form  such 
a  basis  to  a  degree,  for  the  pure-base  of  new  securities  by  the 
bank,  or  for  loans  which  would  result  in  that.  At  the  same 
time,  the  bonds  sold  by  the  government  to  procure  the  fifty 
millions  would  themselves  draw  interest,  constituting  one  form 
of  commercial  ownership  of  the  food-facilities,  if  an  indirect 
one,  in  spite  of  the  governmental  control. 

But  in  the  normal  run  of  events  this  fifty  millions  will  im- 
mediately enter  the  market,  in  one  way  or  another,  as  a  bidder 
for  new,  raw  securities,  or  for  other  paper  the  sale  of  which 
releases  demand  for  new  securities.  Indeed,  the  prospect  of 
such  a  governmental  move  as  this  could  hardly  be  announced 
before  the  engravers  would  be  set  to  work  to  print  the  new 
commercial  instruments  with  which  to  absorb,  to  private  profit, 
this  additional  public  credit. 

But  more,  the  commercial  enterprises  which  are  sure  to  be 
launched  with  the  aid  of  this  fifty  millions  of  new  credit-money 
need  no  more  than  be  established  upon  a  paying  basis — a  matter 
often  of  only  a  year  or  so — than  their  stock,  which  sold 
originally  for  next  to  nothing,  will  have  risen  to  ten  times 
that  value.  The  fifty-millions-worth  has  thus  become  five 
hundred  millions  of  new  debt  and  credit,  owed  by  the  Con- 
sumer to  the  commercial  clique ! 

This  is  no  fairy-tale.  There  are  scores  of  stocks  on  'Change 
to-day  on  which  the  rise  in  valuation  since  original  issue  has 
exceeded  this  ten-to-one  illustrative  ratio.  Thus  will  our  gov- 
ernmental venture  in  food-facilities — or  it  might  as  well  have 
been  railways,  or  telegraphs,  or  coal-mines — have  canceled  not 
one  dollar's  worth  of  existing  commercialism,  and  have  brought 
about  indirectly  an  increase  measurable  perhaps  by  hundreds 
of  millions. 

Anyone  who  feels  that  the  Government's  war-invasion  of 
business  has  meant  a  decline  in  commercialism  would  do  well 
to  note  that  the  single  year  of  1916-17,  with  its  remarkable 
outburst  of  governmental  activity  in  industry,  yet  witnessed  a 
growth  of  over  53  per  cent  in  the  number  of  our  millionaires! 

But  the  end  of  commercialistic  expansion  due  to  govern- 
mental ownership  has  not  yet  been  told.  For  the  ownership  of 
these  hundreds  of  millions  is  indeterminate.  In  order  to  de- 
termine it  by  combat  there  will  be  attracted  into  the  field  a 
fresh  enlistment  of  speculators,  brokers,  bankers,  clerks,  bond- 


700  MODERN   ECONOMIC   TENDENCIES 

salesmen,  stenographers,  book-keepers,  etc.,  and  all  those  who 
feed,  shelter  and  amuse  them.  What  the  amount  of  all  this 
would  be,  indeed,  if  it  were  the  railways  or  telegraphs  or  coal- 
mines which  were  involved,  instead  of  a  paltry  fifty  millions' 
worth  of  food-appliances,  may  scarcely  be  imagined. 

But,  whatever  they  might  be  in  amount,  they  would  all 
inevitably  be  upon  only  one  side  of  the  account,  namely,  that 
going  to  exaggerate  commercialism.  The  only  thing  which  will 
even  arrest  the  growth  of  commercialism — and  even  this  will 
not  reverse  that  growth  and  annul  the  commercialism  already 
existing — is  the  absolute  prohibition  of  the  issue  of  any  new 
securities,  of  any  sort  whatever,  or  the  embarkation  of  indi* 
viduals  upon  any  new  commercial  scheme. 

But  the  task  in  hand  is  not  to  explore  the  tempting  question 
as  to  what  would  happen  if  this  prohibition  were  undertaken, 
but  merely  to  note  current  history  to  date.  As  a  part  of  that 
history  the  fact  must  be  emphasized  that  no  extension  of  gov- 
ernmental ownership  yet  accomplished  has  ever  overtaken  in  the 
slightest  degree  the  simultaneous  expansion  of  commercialism. 

There  is  no  evidence  that  any  conceivable  acceleration  of 
such  a  governmental  policy  can  do  aught  else  than  accelerate 
the  growth  of  commercialism  faster  than  itself.  Any  advance 
in  governmental  ownership  pushes  commercialism  ever  on  in 
front  of  itself,  and  further  out  of  its  own  reach,  much  as  a 
horse  will  push  ahead  of  it  the  wisp  of  hay  which  its  boy- 
driver  has  tied  on  a  pole  extending  over  its  head — except  that 
the  hay  can  never  move  faster  than  the  horse,  whereas  com- 
mercialism is  ever  propelled  further  out  of  control  by  each  effort 
of  the  government  to  overtake  it.2 

As  war-measures  these  extensions  of  governmental  control 
are  most  interesting ;  but  as  means  for  annulling  commercialism 
— even  if  such  were  their  admitted  object — they  are  utter 
failures.  For  even  if  the  further  issue  of  securities  might  be 
prohibited  by  law,  the  result  would  not  be  to  repress  commer- 
cialism, but  to  repress  industry;  for  industry,  having  no  more 

zAttention  has  been  called  elsewhere  in  the  book  to  the  fact  that 
the  inauguration  of  the  parcel-post,  which  represented  a  step  forward 
in  governmental  enterprise  such  as  might  be  expected  only  once  in 
several  years,  had,  even  if  wholly  successful  in  conceling  commercialism 
to  its  entire  figure,  done  only  what  the  natural  growth  of  commercialism 
would  make  good  in  ten  days! 


MISCELLANY  701 

natural  circulating-medium,  is  forced  to  rely  upon  these  issues 
for  the  fluid  essential  to  its  life,  and  hence  must  collapse  when 
it  is  withdrawn  or  estopped. 

Just  as  we  saw  how  commercialism  enforces  a  fixed  propor- 
tion of  food-production  to  demand  for  food,  or  to  possibility 
of  production,  regardless  of  variation  in  either — or  of  propor- 
tion of  advertising  to  reading-matter  in  our  periodicals,  re- 
gardless of  the  supply  of  news — so  the  proportion  of  industry- 
support  to  Consumer-tax  embodied  in  the  current  issue  of  se- 
curities is  fixed  by  the  volume  of  commercialism  prevalent  at 
the  moment.  All  these  things  can  vary,  not  as  public  desire 
dictates,  but  only  as  commercialism  happens  to  vary — at  the 
behest  of  still  deeper  forces  which  it  is  not  the  province  of 
this  volume  to  explore. 

The  expansion  of  our  life-support  is  not  subject  to  control 
by  legislation.  It  cannot  be  stimulated  either  by  the  encour- 
agement of  industry  or  by  the  discouragement  of  commercialism ; 
because,  so  long  as  the  latter  is  allowed  to  exist  at  all,  it  must 
dominate  the  former.  Stimulate  or  repress  either  of  these 
two,  and  you  stimulate  or  depress  both  together.8 

The  economic  situation  to  date  has  been  becoming  bad  at 
such  a  rate  that  all  our  statistics  fail  to  express  it.  Yet  the 
prospect  for  the  future  is  worse.  For  now,  with  the  advent 
of  the  Great  War  of  1914,  and  especially  with  America's  entry 
therein,  there  has  come  upon  us  the  combination  of  the  two 
sorts  of  militarism  simultaneously — martial  militarism  added 
to  commercial  militarism.  Without  any  permanent  diminution 
in  the  volume  or  intensity  of  commercial  combat,  military 
combat  upon  an  unheard-of  scale  has  been  added.  With  no 
retirement  of  private  interest-bearing  credit-instruments,  nor 
even  any  appreciable  arrest  of  their  growth,  governmental  credits 
have  been  added  thereto  at  a  rate  never  before  dreamed  pos- 
sible by  man — probably  to  the  extent  of  two  hundred  billions 
in  all. 

The  present  world-war  is  the  greatest  tragedy  of  history. 
Its  explosions  literally  shake  continents.  Yet  there  are  signs 

sThe  frantic  efforts  of  those  intellectually  timid,  but  otherwise  worthy, 
people  who  attempt  to  improve  living  conditions  in  one  way  or  another, 
yet  without  regard  to  these  broad  laws,  remind  one  of  one  of  the 
freaks  in  Artemas  Ward 's  famous  museum.  It  was  one  of  the  Siamese 
twins — "the  only  one  which  had  been  separated.1' 


702  MODERN   ECONOMIC   TENDENCIES 

that  the  biggest  mine  of  the  western-front  is  but  a  pop-gun 
compared  with  that  magazine  of  high  explosive  now  being 
heaped  up  in  the  form  of  commercial  credits  and  congested 
cities,  setting  the  stage  for  a  near-future  drama  at  home  far  more 
gigantic  than  that  now  being  enacted  abroad. 

Reform. — Tribute  has  already  been  paid  in  this  book  to  the 
vital  importance  of  an  adequate  volume  of  credit,  in  permitting 
the  rapid  development  of  a  country's  energy  and  resources. 
However  the  interest-bearing  feature  of  commercial  credits  has 
been  denounced  herein,  effort  has  everywhere  been  made  to 
emphasize  the  necessity,  in  planning  reform,  to  preserve  the 
factor  of  credit  while  removing  its  burden  of  interest-charges. 

What  all  people  are  coming  to  believe  is  that  we  need  reform 
in  our  system  of  production.  They  feel,  in  one  way  or  another, 
the  pinch  of  necessity,  and  so  conclude  that  it  is  our  pro- 
ductive system  which  is  at  fault.  The  socialists  follow  this 
line  of  argument  with  the  added  error  of  defining  production 
as  whatever  is  done  for  wages. 

But  the  trouble  is  not  here  at  all.  Our  productive  system — 
the  factory-system — is  well  nigh  perfect,  as  a  system,  and  is 
now  producing  more  per  capita  than  ever  before  in  history. 
It  is  our  system  of  interchange  which  alone  is  at  fault;  and  in 
any  such  a  system  the  feature  of  credit  performs  the  most 
essential  function.  It  is  these  which  need  reform. 

But,  as  a  step  in  this  direction,  public  ownership  has  been 
a  total  failure.  In  so  far  as  it  has  proceeded  through  equitable 
purchase  it  has  failed  to  reduce  the  volume  of  interest-bearing 
credits,  or  to  substitute  any  other  form  for  them.  In  so  far 
as  it  might  proceed  through  confiscation,  as  in  the  case  of  the 
parcel-post,  it  finds  itself  face  to  face  with  a  hostile  public 
opinion.  It  has  not  yet  won  public  faith.  There  is  no  credit 
there.  The  people  are  no  more  in  a  position  to  feel  the  good 
lue  to  what  little  public  ownership  we  now  have — lost  as  it  is 
;n  the  vast  tide  of  commercial  prices — than  they  are  to  appre- 
ciate the  evil  latent  in  commercialism,  without  a  much  more 
systematic  education  in  that  direction  than  is  now  current. 


CHAPTER  XXIII 

THE  EVOLUTION   OF  AMERICAN   CIVIC   CONSCIOUSNESS 

IN  the  growth  of  our  land  from  the  untrammeled  conditions 
of  its  youth,  when  the  individual  will  had  a  play  all  but  un- 
limited by  social  obstacles,  down  to  the  present  day,  when  the 
problems  of  social  environment  have  far  outgrown  those  of 
nature's  mysteries,  man's  consciousness  of  this  change  has  fol- 
lowed slowly  and  reluctantly.  There  has  always  been  a  lag 
between  the  real  need  of  the  day  and  his  recognition  of  it  in 
action. 

It  is  from  this  lag  that  all  of  his  sufferings  have  arisen.  It  is 
to  protect  him  from  this  lag,  by  the  acceleration  of  his  scientific 
wisdom  into  parallel  with  his  forward,  unthinking  energy,  that 
is  the  function  of  professional  sociology. 

In  1850  the  privately  owned  factory-system,  while  already 
some  sixty  to  one  hundred  years  old,  was  still  impotent  as  a 
major  factor  in  affairs.  Most  production  was  still  conducted 
upon  the  cottage-system.  Markets  were  narrowly  restricted  by 
distance  and  by  lack  of  transportative  facilities.  Commercialism 
was  even  more  crude  than  industry.  Therefore  it  was  but  natural 
that  philosophies  should  then  be  based  upon  the  individual  will. 

The  people,  enjoying  unusual  prosperity  and  license  in  the 
novel  combination  of  a  rich  and  virgin  continent  with  political 
liberty,  were  impatient  of  warning  or  restraint.  Their  free  en- 
vironment protected  them  from  the  pressure  of  economic  forces. 
Their  governments  were  still  too  boyish  in  responsibility  to 
admit  of  success  in  public  enterprise,  and  were  yet  too  inde- 
pendent to  confess  the  need  for  that  civic  sense  which  might 
bring  it. 

It  was  only  about  a  decade  previously  to  1850  that  the  coun- 
try's first  attempts  at  building  canals  and  railroads,  through 
public  enterprise,  had  proven  disastrous.  The  opportunity  for 
special  privilege  latent  in  the  alternative  to  this  method — private 

703 


704  MODERN   ECONOMIC   TENDENCIES 

initiative  and  finance — had  been  born  only  with  this  disaster, 
and  had  not  yet  become  conscious  of  its  power. 

Ideals  of  patriotism  then  consisted  in  spread-eagle  oratory, 
coupled  with  a  sincere  readiness  to  fight  for  liberty — or  for  the 
mere  fun  of  it — at  the  drop  of  the  hat.  Roosevelt  describes, 
among  the  recreations  of  those  days,  fist-fights  in  which  the 
gouging  out  of  eyes  was  still  admitted  as  a  standard  feature. 
Prize-rings  were  still  habitually  roped  off  in  the  streets  of  New 
York  City.  "Stump-speeches"  were  still  literally  such. 

It  was  a  time,  too,  of  reaction  against  the  chafing  policies  of 
federalism  which  the  unwelcome  Revolution,  the  forced  adoption 
of  a  national  constitution,  and  the  warning  War  of  1812,  had 
successively  obtruded  upon  a  reluctant  public  opinion.  Every- 
one, north  and  south  alike,  wished  to  be  free  to  concentrate  upon 
making  money,  without  hindrance  by  broad  questions  of  national 
progress  or  abstract  considerations  of  humanitarianism. 

Then  gradually  reared  its  head,  as  the  fruit  of  this  selfish 
neglect,  the  unwelcome  agitation  over  negro-slavery — as  unwel- 
come as  is  now  our  parallel  agitation  over  the  question  of  eco- 
nomics. Then,  for  two  or  three  decades  past,  those  interested  in 
slavery  had  been  laying  increased  stress  upon  "states'  rights." 
By  1833  this  had  led  to  the  "nullification"  movement  in  South 
Carolina — summarily  quelled  by  force  of  authority,  by  Andrew 
Jackson,  but  without  touching  its  cause.  By  1836  this  trend 
had  led  to  the  formulation  and  proclamation  of  the  so-called 
"gag-rule"  in  Congress,  according  to  which  the  South  denied  the 
right  to  Congress  even  to  debate  the  topic  of  slavery,  as  a  private 
personal  matter  belonging  to  the  South  alone.  This  was  a 
measure  which,  had  it  been  met  by  the  North  in  the  spirit  to 
which  the  latter  responded  to  the  firing  on  Fort  Sumter,  the 
Civil  War  would  never  have  been  fought. 

Everywhere  free  and  incisive  debate  was  frowned  upon.  By 
1856  the  entire  commercial  interests  of  the  land,  both  north  and 
south,  had  united  in  that  "safe  and  sane"  campaign  against  the 
"seditious  agitation"  of  the  abolitionists — to  conserve  business 
and  its  profits  at  the  expense  of  a  free  discussion  of  the  humani- 
tarian topic  of  slavery — which  elected  Buchanan.  And  Buchanan 
came  into  office  with  the  avowed  promise  to  repress  that  agitation 
by  force,  and  thus  attain  "peace."  Yet  his  name  comes  down 
history  as  that  of  a  puppet,  the  only  effect  of  whose  subconscious 
acts  was  to  delay  the  discussion  of  slavery,  until  it  had  been 


THE   EVOLUTION   OF   AMERICAN   CIVIC   CONSCIOUSNESS     705 

forced  to  exchange  its  peaceful  garb  of  humanitarianism  for  the 
martial  gear  of  a  political  question  able  to  rend  the  federal  gov- 
ernment into  twain — to  make  it  totter  so  that  even  Lincoln 
doubted. 

Thus  was  revealed  the  identity  in  spirit  among  all  profit- 
seeking  oligarchies,  whether  in  eighteenth-century  France,  in 
pre-victorian  slave-owning  American  South,  in  Bismarckian 
Prussia  or  in  twentieth-century  commercialistic  American  North. 
Thus  that  instinct  in  the  North  for  making  profits  regardless  of 
right  which  had  originally  peopled  the  South  with  negro-slaves, 
stolen  from  Africa  and  transported  across  the  Atlantic  under 
conditions  more  regardless  of  mercy  than  any  which  have  tar- 
nished American  history,  now  again  led  the  northern  commer- 
cialists  into  a  sympathy  and  co-operation  with  the  southern  slave- 
owner, the  ethical  significance  of  which — as  a  certain  precursor 
of  social  convulsion — we  still  fail  to  grasp. 

This  stupid,  reactionary  tendency  against  free  speech  in  1856 
forced  upon  us  in  1861  the  Civil  War,  as  the  only  possible  auto- 
matic adjustment  of  a  not  very  intricate  difficulty,  which  we  had 
persistently  refused  to  solve  by  debate.  It  also  acted  to  bring  our 
federal  organization,  which  was  loose  and  crude  under  the  old 
states'  rights  and  slavery  ideas,  into  consonance  with  the  growing 
solidarity  created  by  the  railway  and  the  telegraph.  But  the 
economic  tendency  which  this  reactionary  policy  implanted  in 
our  traditions — that  of  reliance  upon  private  selfishness  for  all 
public  initiative — yet  remains  to  be  worked  out  into  adjustment 
with  modern  conditions. 

For,  however  the  Civil  War  may  have  jumped  ahead  our 
political  ideas,  by  establishing  forever  the  supremacy  of  federal 
over  state  interests,  it  had  no  effect  upon  the  trend  of  commer- 
cial affairs  except  to  accelerate  them.  The  issues  of  the  war, 
while  simple  relatively  to  what  confronts  us  now,  were  yet  too 
intricate  for  it  to  be  perceived,  at  that  time,  that  the  suddenly 
evil  aspect  of  the  centuries-old  institution  of  slavery  was  due 
solely  to  its  having  become,  through  the  catalysis  of  invention, 
a  big  and  profitable  business;  nor  that,  while  the  business  of 
owning  slaves  might  be  discontinued,  that  of  owning  other  things 
industrial  might  prove  to  be,  in  the  long  run,  just  as  dangerous 
to  the  nation  as  slavery. 

For  the  Civil  War  was  fought,  it  must  be  remembered,  not  out 
of  commiseration  for  the  slaves,  but  in  order  to  preserve  the 


706  MODERN   ECONOMIC   TENDENCIES 

nation.  It  will  be  the  same  in  our  coming  economic  crisis.  Only 
when  civilization  totters  will  we  act. 

The  triumph  of  the  Republican  Party  after  the  war,  fed  by 
the  war-issues  of  commercial  credits  and  the  prosperity  resultant 
therefrom,  and  no  longer  checked  by  Lincoln's  sense  and  modera- 
tion, launched  the  country  into  a  era  of  reckless  commercial 
expansion.  This  was  at  first  unconsciously,  but  soon  deliberately, 
fostered  by  the  tariff — a  policy  which  has  continued  to  gather 
strength  until  recently. 

The  resultant  panics  of  1873,  etc.,  were  attributed  wholly,  as 
was  true  only  in  part,  to  defects  in  the  currency-system.  That 
the  cause  of  these  crises  might  lie  deeper  than  that,  in  the  in- 
sidious poison  of  profitable  special  privilege,  was  not  then  under- 
stood. 

The  fact  of  commercial  expansion  may  have  been  checked 
automatically,  for  the  moment,  by  these  panics;  but  faith  in 
the  commercial  system  remained  increasingly  ardent.  As  soon 
as  recovery  permitted,  "progress"  was  resumed,  in  the  com- 
mercial sense  of  an  unending  issue  of  interest-bearing  securi- 
ties, of  the  intrusion  of  increasing  numbers  of  persons  into 
profit-seeking  vocations  and  of  the  maintenance  of  prices  at  the 
maximum  which  traffic  would  bear. 

The  war-credits  were  being  retired  and  so  the  general  price- 
level  fell;  but  the  money  paid  for  the  bonds  by  the  govern- 
ment found  prompt  reinvestment  in  commercial  securities.  Of 
the  soldiers  mustered  out  of  the  armies  many  enlisted  anew 
in  commercial  militarism. 

By  the  time  that  reaction  from  the  Republican  momentum 
acquired  from  the  Civil  War  had  again  placed  the  Democrats 
in  ascendancy,  in  the  election  of  Grover  Cleveland,  the  obvious 
weaknesses  of  our  currency-system  had  centered  interest  upon 
the  issue  between  the  gold  standard  and  bimetallism.  For  the 
next  quarter-century  that  and  the  commercially  profitable  tariff 
monopolized  public  debate. 

On  the  one  side  the  people,  suffering  from  pressure  due  to 
commercialism,  yet  not  understanding  just  how,  attributed  their 
ills  to  the  gold  standard.  On  the  other  the  commercialists,  feel- 
ing the  innocence  of  that  scape-goat,  accused  the  bimetallists  of 
a  dishonest  intent  to  repudiate  debts.  On  both  sides  the 
original  and  obscure,  but  pregnant,  error  in  our  economic  policy 
of  1840 — the  abandonment  of  public  for  private  enterprise  in 


THE  EVOLUTION  OF  AMERICAN  CIVIC   CONSCIOUSNESS    707 

public  works — was  quite  forgotten,  in  the  face  of  the  im- 
pressive commercial  prosperity  of  the  land. 

Yet  already  commercialism  had  proven  the  potency  of  its 
"invisible  government,"  both  in  its  suppression  of  adequate 
debate  of  the  slavery-issue  until  war  had  become  the  only  solu- 
tion, and  in  its  later  veto  of  any  revision  of  the  tariff  by 
public  will.  For  repeated  popular  votes  in  favor  of  revision 
came  to  naught. 

Originally  the  tariff  had  been  a  war-measure  only;  but  now 
it  had  proven  so  profitable  an  aid  to  commercialism  that  all 
parties,  including  even  the  Democratic,  had  become  blinded 
by  its  glitter  and  silenced  as  to  its  faults.  Full  thirty  years 
of  national  devotion  to  its  active  discussion  were  required  before 
even  its  slight  modification  could  be  obtained. 

But  by  that  time  our  infantile  commercialism  had  grown 
to  such  proportions  that  the  invaliding  of  its  foster-parent,  the 
tariff,  made  no  perceptible  dent  in  its  self-sufficiency.  Tariff- 
reform,  for  a  generation  an  idol  before  which  had  been  burnt 
ship-loads  of  red  fire,  when  finally  accomplished,  started,  when 
cast  overboard,  no  visible  ripple  upon  the  placidly  rising  tide 
of  commercial  profits. 

There  is  nowhere  in  history  any  proof  of  the  futility  of 
trying  to  effect  progress  in  the  face  of  profitable  special  privi- 
lege, through  debate  alone,  so  striking  as  was  this  fiasco  of  the 
long-sought  tariff-reform.  The  only  other  instance  comparable 
with  it  is  that  equally  childish  fizzle,  the  enforcement  of  the 
Sherman  anti-trust  law — to  an  increase,  rather  than  a  de- 
crease, of  both  the  profits  and  the  costs  of  doing  business,  the 
two  factors  which  work  together  to  burden  the  people  into 
discontent. 

By  the  time  that  the  closing  decade  of  the  nineteenth  century 
had  been  reached  all  parties  had  agreed,  willingly  or  unwill- 
ingly, that  commercialism  must  be  fostered.  At  the  same  time, 
the  inevitable  tide  of  groping  protest  against  these  mysterious 
economic  hardships,  oppressing  the  people  so  incomprehensibly 
in  a  free,  rich  continent,  arose  steadily  over  the  land,  in  a 
series  of  protesting  reform-movements. 

First  came  the  "mugwumps,"  the  first  to  break  the  hidebound 
traditions  of  that  day  as  to  the  debate  of  all  issues  in  terms 
of  federal  policies — Republican  versus  Democratic.  Then  came 
the  populists,  specifically  expressing  the  need  for  a  better  dis- 


708  MODERN   ECONOMIC   TENDENCIES 

tributed  system  of  general  credit,  based  upon  some  foundation 
broader  than  gold,  in  their  "sub-treasury"  schemes.  Finally 
appeared  the  socialists — a  movement  which  had  figured  in 
European  politics  ever  since  the  appearance  of  steam-power 
had  transformed  the  old  political  discontents  of  the  eighteenth 
century  into  the  economic  ones  of  the  nineteenth — with  a  pro- 
gram deliberately  posing  economic  factors  in  the  title-roles 
of  the  drama  of  progress. 

But  the  fruiting  of  all  these  protests  was  then,  and  is  still 
now,  submerged,  choked  and  paralyzed  by  the  vastly  more 
rapidly  rising  weed-growth  of  commercial  profits.  The  flood 
of  prestige  which  always  attends  profitableness  is  drowning 
every  faint  voice  of  warning.  It  was  upon  the  crest  of  this 
tidal  flood  that  McKinley  rose  into  power,  as  the  avowed 
champion  of  commercialism,  advocating  an  ever  higher  tariff. 
It  was  because  the  zenith  of  this  tidal  rise  had  not  yet  been 
reached  that  Eoosevelt's  demand  for  "a  square  deal  for  the 
people"  proved  as  premature,  and  as  impotent  to  reverse  its 
flow,  as  have  all  other  protests. 

His  denunciations  of  the  "malefactors  of  great  wealth,"  as 
individually  responsible  for  the  country's  economic  vagaries, 
will  long  stand  as  witness  of  how  little  the  true  situation  was 
grasped  by  even  the  most  prominent  of  men.  For  it  is  not  the 
commercialists,  but  the  institution  of  commercialism,  which  has 
invaded  our  liberties,  distorting  the  people's  square  deal  into 
a  three-cornered  hat.  Driven  by  the  forces  set  going  by  this 
institution  ensconced  amidst  the  hundred  millions,  the  com- 
mercialists themselves  are  but  puppets,  animated  into  a  de- 
structiveness  of  the  degree  of  which  they  are  quite  unconscious. 

The  result  of  all  this  following  of  the  line  of  least  resistance 
has  been  a  growth  of  commercialism  new  to  world-history,  in 
its  magnitude,  in  its  instability  and  in  its  disregard  of  public 
equities.  With  it  have  grown  the  normal  fruits  of  commercial 
militarism  as  a  national  philosophy — special  privileges  for  the 
few,  discontent  and  disrespect  of  the  law  by  the  many,  a  relative 
deficiency  in  food-supply,  and  prices  rising  relentlessly  for  all. 

Industry,  naturally  modest  and  pacific,  has  thereby  been 
forced  to  adopt,  as  a  protection  against  commercial  aggression, 
a  hard  shell  of  combative  and  arrogant  trades-unionism.  Com- 
mercialism, recognizing  in  this — its  natural  child — a  foeman 
worthy  of  its  steel,  has  adopted  toward  trades-unionism  an  atti- 


THE   EVOLUTION   OF  AMERICAN   CIVIC   CONSCIOUSNESS    709 

tude  of  armed  neutrality.  For  capitalism  knows,  as  trades- 
unionism  evidently  does  not,  that  the  real  source  of  life-blood 
for  them  both  is  the  Ultimate  Consumer. 

Both  capitalism  and  labor  are  daily  improving  their  organ- 
ization for  offense  and  defense.  It  is  only  the  general  public 
of  Ultimate  Consumers,  which  must  pay  the  cost  of  both  the 
armaments  and  their  use,  which  is  not  organizing  at  all. 

But  in  all  this  growth  of  the  crisis,  progress  has  consisted 
not  so  much  in  the  introduction  of  novel  methods  as  in  the 
spread  into  the  respectability  of  the  land  of  those  previously 
discountenanced,  and  therefore  rare.  There  is  probably  no  date 
so  early  that  any  of  our  modern  methods  of  high  finance  cannot 
be  found  in  embryo,  practiced  by  an  occasional  sharper.  But 
since  then  these  questioned  practices  have  spread — always 
against  the  frowns  of  the  still  uncontaminated,  yet  with  a 
motive  force  back  of  them,  in  their  profitableness,  which  none 
could  long  resist — and  so  by  familiarity  have  ceased  to  be 
questionable. 

Thus,  when  our  national  Constitution  was  being  written  a 
banker  was  scarcely  received  in  polite  society.  A  little  over  a 
century  ago  stock-broking  was  considered  as  far  below  social 
decency  as  slave-driving  had  become  in  1850,  or  as  stock-watering 
was  in  1875.  Yet  all  through  that  period  the  ownership  of 
slave-ships  was  winked  at. 

The  methods  pursued  by  the  railway-wreckers,  kite-tail 
bankers  and  mine-salters  of  a  half-century  ago,  then  dis- 
countenanced by  every  merchant,  have  to-day  become,  in  effect, 
the  approved  practice  in  every  line  of  supply  to  the  people — 
not  that  crass  deceit  in  the  adulteration  of  commodities  is 
longer  so  common,  but  that  it  has  been  replaced  by  an  even 
more  predatory  deceit  as  to  the  value  to  the  Consumer  embodied 
in  the  price  asked.1 

iThat  commercialism  is  still  not  above  instigating  its  votaries  to 
common  larceny,  through  adulteration  of  quality  or  weight,  may  be 
judged  by  the  statement  made  before  the  Weights  &  Measures  Associa- 
tion, of  New  York  City,  by  Mr.  Franklin  Brooks,  author  of  the  law 
governing  the  regulation  of  weights  and  measures  (as  reported  in  the 
Times  for  May  20,  1915)  to  the  effect  that  the  law  was  being  violated 
"all  over  the  city/*  He  estimated  that  the  people  of  New  York  State 
lose  about  sixty  million  dollars  a  year  through  violations  of  this  law. 

Any  disposition  to  "muckrake"  could  collect  any  amount  of  evidence 
to  the  effect  that  commercialism,  in  addition  to  being  an  absurdly 


710  MODERN   ECONOMIC   TENDENCIES 

Man  does  not  object  to  sinning,  but  to  seeing  himself  sin. 
It  is  not  the  immorality,  but  the  obviousness,  of  swindling  the 
Consumer  which  has  disappeared.  As  society  has  become  more 
intricate,  many  methods  of  fraud  which  before  stood  out  too 
baldly  for  wide  adoption  have  now  become  so  "lost  in  the 
shuffle"  as  to  be  widely  practiced,  although  still  discreetly 
cloaked. 

Thus  has  our  civic  consciousness  gradually  altered  under 
economic  stress.  Whereas  the  more  stable  strata  of  society  are 
now  as  patriotic  as  the  country's  founders  could  have  wished, 
yet  all  classes  are  simultaneously  drifting  out  of  touch  with 
the  country's  specific  needs.  The  lucrativeness  of  commer- 
cialism is  blinding  us  all  to  the  true  nature  of  patriotism.  Those 
who  are  directly  involved  in  commercialism  can  see  no  flaw 
in  its  golden  charms.  Those  most  heavily  burdened  by  it  are 
blaming  our  innocent  political  government  for  commercialism's 
sins,  and  are  becoming  disloyal  bolshevists. 

The  great  mass  of  in-betweens  are  making  the  equal  mistake 
of  looking  to  educational  or  psychic  development  of  the  in- 
dividual for  the  reform  of  an  evil  which  offers  no  slightest 
evidence  of  being  founded  upon  any  imaginable  defect  in  the 
individual — except,  perhaps,  his  blindness  to  the  evidence  of 
economic  fact.  We  cannot  grasp  the  power  inherent  in  institu- 
tional relationships  to  convert  individuals  into  puppets. 

inefficient  system — which  is  the  chief  count  upon  which  it  has  been 
indicted  here — is  often  a  crass  and  conscious  fraud.  With  the  larger 
commercialists  technical  fraud  is  of  course  largely  tabooed.  It  is  now 
a  half-dozen  years  since  the  last  epidemic  of  conviction  of  prominent 
corporations  for  fraud  manifested  itself.  But  in  innumerable  petty 
ways,  like  the  lining  of  chocolate-packages  with  pasteboard,  and  a 
myriad  of  other  contemptible  methods  of  deceit  of  the  Consumer  which 
do  not  fall  within  the  pale  of  the  law,  commercialism  is  more  guilty 
to-day  than  ever  before. 


MEZZANINE  CHAPTER 
THE  AUTHOR'S  POINT  OF  VIEW 

(THIS  mezzanine  chapter  is  written  after  the  entire  re- 
mainder of  the  book  has  been  completed.  It  is  inserted  here, 
however,  following  the  impersonal  scientific  analysis  which  has 
preceded,  in  order  to  anticipate  the  more  personal  conclusions 
which  the  author  draws  therefrom  in  the  later  chapters — Janu- 
ary, 1920.) 

The  central  idea  of  this  book  arose  in  the  course  of  a 
friendly  controversy  with  one  of  the  greatest  minds  in  American 
history,  Edward  Bellamy,  during  the  years  1890-93,  and  was 
first  committed  to  paper  in  1898-1906,  in  the  manuscript  for 
the  author's  "Cost  of  Competition."  At  the  earliest  of  those 
dates  the  world  did  not  see  the  word  socialism  in  print  twice 
a  year.  Economic  revolution  was  the  farthest  possible  from 
the  minds  of  all. 

To-day  this  same  central  idea,  re-attacked  in  1913,  has 
gradually  ripened  into  the  present  book,  finally  to  appear  at  a 
time  when  the  world  is  stricken  with  fear  of  revolution  and 
hatred  of  all  radical  ideas.  Sedition  and  treason  are  the  issues 
of  the  day.  All  who  question  in  any  way  the  existing  economic 
regime  are  open  to  denunciation,  upon  the  score  of  disloyalty 
to  our  polictial  regime — which  is  a  very  different  thing  altogether. 

Therefore  it  is  important  that  the  author  should  announce 
specifically  his  loyalty  to  the  American  government  and  to 
American  traditions  of  political  liberty.  He  has  tried  to  make 
it  plain  throughout  this  book,  indeed,  that  it  is  this  very  loyalty 
which  impels  him  to  his  attack  upon  commercialism,  as  a 
despotic  oligarchy  which  is  as  sure  to  disrupt  our  government 
as  slavery  was  bound  to  do.  But  there  are  many  who  mis- 
understand. 

The  author's  mother's  family  settled  on  Cape  Cod  about  the 

711 


712  MODERN   ECONOMIC   TENDENCIES 

year  1650,  and  members  of  that  family  have  since  fought  in 
every  war  which  has  aided  in  building  our  Constitution  into 
what  it  is,  until  the  male  stock  ran  out.  The  author's  father 
was  English-born,  coming  to  this  country  in  1832.  The  author 
was  born  in  Ohio. 

The  author  believes  that  our  American  political  democracy 
is  the  highest  and  best  form  of  political  government  extant. 
He  believes  that  it  accords  liberty  to  all  as  nearly  as  any 
political  government  can  do.  He  believes  that  all  our  troubles 
arise  not  from  our  political  imperfections,  but  from  our  economic 
institutions,  wherein  we  completely  lack  organization  or  con- 
stitution. For  the  natural  economic  sovereignty  of  the  Ulti- 
mate Consumer  over  matters  economic  now  lacks  recognition 
as  completely  as  the  equally  basic  sovereignty  of  the  individual 
voter  over  matters  political  was  unrecognized  in  1750. 

Our  failure  to  understand  our  social  problems  rests  primarily 
upon  our  inability  to  distinguish  clearly  between  these  two 
functions.  The  function  of  the  individual  as  a  citizen  of  the 
political  world,  which  he  exercises  as  a  voter,  is  one  thing.  It 
is  organized  and  protected  by  the  Constitution  of  these  United 
States. 

But  the  function  of  the  individual  as  a  citizen  of  the  economic 
world,  which  he  exercises  as  an  Ultimate  Consumer,  is  totally 
distinct  from  this.  It  is  now  quite  unrecognized,  unorganized 
and  impotent.  Its  mere  assertion  is  assailed  as  treason. 

Therefore  the  author  decries  any  attack  upon  our  political 
government,  as  destructive  of  good  for  all  classes,  and  helpful 
to  none — not  even  the  most  oppressed.  His  aim  is  to  build 
further,  not  to  tear  down.  For  that  reason  he  would  guard 
most  jealously  every  atom  of  constructive  social  evolution  which 
has  yet  been  accomplished,  at  the  price  of  so  much  precious 
blood  and  pain  poured  out  in  past  American  history. 

But  (he  may  explain  to  the  radicals)  he  decries  all  attack 
upon  our  political  government  for  another  reason  also.  This 
is  that  our  political  government  is  dominated  lay,  and  is  there- 
fore impotent  before,  those  huge  economic  forces  which  are 
debated  in  these  chapters.  No  assault  directed  against  the  page 
can  prevail  against  the  knight. 

Attack  upon  our  political  institutions  or  administration  is 
not  only  misdirected,  in  that  they  are  not  responsible  for  our 
economic  ills.  It  is  futile;  because  Washington  cannot  control 


THE  AUTHOR'S  POINT  OF  VIEW  713 

commercialism  if  it  would.  And,  so  long  as  the  majority  of 
the  people  believe  in  commercialism,  of  course  it  will  not,  and 
should  not,  try. 

There  exists  nowhere,  either  in  monarchical,  military  Europe 
nor  in  democratic  America,  nor  even  in  soviet  Russia,  any 
government  having  the  power  to  restrain  these  gigantic  economic 
phenomena.  If  the  socialists  make  a  tragic  mistake  in  be- 
lieving that  their  form  of  government  is  able  to  overrule  these 
natural  economic  laws,  our  own  patriotic  but  conservative  public 
opinion  makes  a  far  greater,  but  less  excusable,  mistake  in 
thinking  that  our  representative  political  democracy,  which  is 
dependent  upon  rather  than  superior  to  commercialism,  em- 
bodies this  authority. 

It  does  not.  That  power  does  not  now  exist  anywhere  on 
earth.  We  have  not  yet  even  attempted,  let  alone  accomplished, 
the  organization  of  the  only  authority  truly  sovereign  over  com- 
mercialism, namely,  that  of  the  Ultimate  Consumer.  The  whole 
problem  of  modern  sociology  is  how  to  create  such  an  organiza- 
tion. The  whole  menace  of  social  travail  is  involved  in  the 
labor  of  its  coming  birth. 

For  the  pending  economic  crisis,  we  have  shown,  pivots  upon 
two  basic,  but  quite  modern,  cancerous  growths  within  the  body 
economic.  One  of  these  is  the  steady  migration  of  effort  away 
from  productive  walks  of  life  into  the  more  lucrative  ones  of 
commercial  combat  over  the  produce — a  migration  now  measur- 
able over  the  last  three-quarters  of  a  century,  and  uncontrollable 
except  by  the  abolition  of  all  commercial  opportunity.  The 
other  is  the  endless,  cumulative  issue  of  interest-bearing  com- 
mercial indebtedness  against  the  Ultimate  Consumer. 

Therefore  no  power  may  prevail  against  the  rising  cost  of 
living,  the  increasing  uncertainty  of  employment,  and  hence 
the  growing  menace  of  public  discontent,  unless  it  is  com- 
petent to 

(1)  Coerce  men  out  of  commercial  vocations,  back  into  pro- 
ductive ones;  and 

(2)  Restrain,   annul   and   reverse   the   cumulative   issue   of 
interest-bearing  securities. 

Neither  of  these  powers  is  now  possessed  by  our  political 
government.  They  are  not  anywhere  latent  within  the  Con- 
stitution of  these  United  States,  nor  within  that  of  any  other 
government. 


714  MODERN  ECONOMIC  TENDENCIES 

But  our  real  trouble  lies  not  in  this  fact,  for  the  Constitution 
can  be  amended,  but  in  the  irremediable  fact  that  neither  of 
these  powers  can  be  imparted  to  our  government  without  the 
precipitation  of  a  revolution,  not  among  the  I.  W.  W.f  but  in 
Watt  street  and  in  the  corner-groceries  of  Arizona. 

The  germ  of  this  power  is  latent  within  the  Ultimate  Con- 
sumer, and  there  alone.  But  in  this  capacity  or  function  the 
hundred  millions  are  now  as  completely  lacking  in  organization, 
recognition,  or  even  consciousness,  as  their  political  ancestors 
were  as  to  their  sovereignty  as  voters  in  the  good  year  1750! 
And  a  pretty  revolution  it  took,  with  a  price  upon  the  heads 
of  those  rebels,  Washington,  Adams,  etc.,  before  that  sover- 
eignty became  even  partially  organized  and  recognized,  in  1788 ! 

For  our  existing  government  to  coerce  men,  openly  and 
directly,  in  their  choice  of  a  livelihood,  or  their  selection  be- 
tween idleness  and  work,  or  their  free  determination  of  the 
wage  for  which  they  will  work — all  of  which  were  involved  in 
the  government's  unfulfilled  anti-strike  program  of  late  in 
1919 — would  amount  to  a  direct  invasion  of  those  personal 
liberties  which  have  been  sacred  to  American  soil  ever  since 
it  had  a  government  of  its  own.  It  would  land  us  two  centuries 
backwards,  in  the  feudal  system  again.  Any  such  a  policy  will 
be  fought  deliberately  by  our  very  best  American  manhood. 

Moreover,  these  liberties  are  sacred  by  more  than  tradition. 
They  are  rooted  deep  in  universal  natural  law.  Whatever  may 
be  our  ultimate  solution  of  the  social  problem,  it  must  rest 
upon  respect  for  these  liberties. 

On  the  other  hand,  for  our  government  to  attempt  to  reverse, 
either  directly  or  indirectly,  the  present  rapid  accumulation 
of  interest-bearing  and  profit-bringing  securities,  would  equally 
result  in  revolution.  Such  a  revolution  would  arise  not  by  con- 
scious, personal  revolt  from  below,  but  by  automatic  financial 
collapse  at  the  top.  It  would  take  its  origin  not  in  the  pro- 
letariat, nor  even  in  the  run  of  patriotic  Americans,  but  in 
Wall  Street.  It  would  automatically  shut  down  the  bulk  of 
our  factories  and  railways  within  a  week.  The  unemployed 
and  unfed  would  then  do  the  rest. 

Our  entire  industro-commercial  system  now  lives,  moves  and 
has  its  being  upon  these  interest-bearing  credit-instruments,  as 
its  circulatory  life-blood.  Any  effective  thrust  in  that  direc- 
tion, by  whatever  measure,  amounts  to  an  incision  of  society's 


THE  AUTHOR'S  POINT  OF  VIEW  715 

carotid  artery.  Any  such  an  act  as  that  will  collapse  "Wall 
Street  and  Washington  alike,  all  but  instantaneously,  into  a 
welter  of  our  social  life-blood. 

Whatever  may  be  the  far-reaching  conclusions  enforced  by 
a  recognition  of  this  impotence  of  our  political  government 
over  our  economic  government,  our  present  purpose  is  merely 
to  point  out  the  fact.  Also  it  is  to  show  that  the  author,  in 
emphasizing  this  fact,  is  doing  his  land  a  most  loyal  service, 
rather  than  inciting  to  sedition.  He  cannot  expect  to  adduce 
here  enough  argument  to  convert  every  reader  as  to  the  truth 
of  his  position;  but  he  can  establish  the  purity  of  his  motives. 

For  revolutions  arise  automatically,  we  shall  see,  not  from 
talking  about  them.  They  arise  solely  from  neglecting  to  talk 
about,  and  to  act  about,  their  causes,  until  the  latter  have 
gathered  such  impetus  that  talk  no  longer  avails. 

The  Foundation  Requisite  for  Public  Opinions. — In  the 
preface  to  this  book  it  was  mentioned  that  the  author  had 
contemplated  a  second  part  to  this,  which  is  to  appear  later 
under  the  'title:  "The  Evolution  of  Social  Crises,"  being  a 
study  of  those  general  principles  of  growth  which  have  under- 
lain all  wars  and  revolutions,  in  all  lands  and  all  recent  times. 
Some  such  a  careful  study  of  general  principles  must  properly 
precede  any  drawing  of  conclusions  as  to  our  pending  crisis, 
from  the  data  collected  above. 

Every  man  who  expresses  an  opinion  as  to  the  tendencies 
of  the  day  should  remember  this  propriety.  No  man  has  any 
right  to  express  publicly  any  opinion  upon  the  broad  social 
problems  of  the  day  until  he  finds  himself  equipped  with  a 
complete  philosophy  of  social  evolution,  based  upon  the  uni- 
versal laws  of  natural  organic  evolution  and  competent  to 
explain,  in  a  unitary  way,  all  the  social  crises  of  recent  history. 

Such  a  work  upon  social  evolution  was  already  mapped  out 
by  the  author,  years  ago,  early  in  the  development  of  the 
present  book.  It  was  to  have  formed  the  closing  portion  of 
this  book.  The  publication  of  the  next  two  chapters  of  this 
book,  which  consist  of  conclusions,  should,  properly  speaking, 
have  awaited  the  appearance  of  this  complete  philosophy. 

But  lack  of  the  leisure  requisite  for  committing  so  large  a 
study  to  paper  promises  so  dire  a  delay  before  it  may  be  ready 
— and  in  the  face  of  great  urgency  of  public  need — that  this 
book  must  go  forth  now,  equipped  with  conclusions  which,  how- 


716  MODERN  ECONOMIC  TENDENCIES 

ever  solidly  founded  upon  data  as  to  American  economic  his- 
tory, are  supported  with  only  a  skeleton  of  argument  as  to 
general  principles  of  social  evolution.  In  the  closing  chapters 
of  this  book  will  be  found  fragments  of  such  argument,  sup- 
porting the. deductions  from  the  data  which  precede;  but  they 
cannot  pretend  to  be  more  than  fragmentary. 

Conscious  Social  Intent  vs.  Automatic  Involuntariness. 
— There  is  space  here  for  bare  mention  of  only  one  such 
principle — the  one  principle  regarding  which  the  reader  and 
the  author  are  most  likely  to  misunderstand  each  other,  yet  the 
one  upon  which  depends  much  of  the  rest.  It  turns  upon  the 
idea  which  should  form  the  preface  to  every  course  in  political 
science.  This  idea  raises  the  question  whether  revolutions,  or 
any  other  social  phenomena  of  appreciable  magnitude,  arise 
voluntarily  with  public  opinion,  in  public  consciousness  of  the 
result  destined  to  follow,  or  whether  they  occur  automatically 
and  uncontrollably,  according  to  natural  laws  now  so  little 
understood  that  not  even  the  educated  have  been  able  to  foresee 
any  major  event  of  recent  history. 

Eepeated  occasion  has  been  found,  in  the  preceding  analysis 
of  economic  details,  to  point  out  that  many  of  our  most  im- 
portant economic  phenomena  are  being  determined  for  us  by 
immutable  laws  of  social  balance,  set  going  by  human  acts  which 
were  quite  subconscious  in  their  nature — the  ultimate  result 
being  reached  -  through  intermediate  energy-transformations 
quite  as  striking,  in  their  contrasts,  as  those  which  pervade  our 
most  intricate  mechanical  appliances.  We  shall  now  see  that 
these  minor  and  unquestionable  instances  were  but  lesser  em- 
bodiments of  the  broadest  law  of  social  evolution,  namely,  that 
all  originative  social  acts  are  quite  devoid  of  either  intent,  or 
even  foresight  f  as  to  the  results  inevitably  to  follow. 

Our  whole  impending  social  crisis,  for  instance,  has  been 
the  work  of  the  men  who  invented  the  steam-engine,  the  power- 
loom,  the  dynamo  and  the  telephone.  Yet  the  inevitable  social 
fruits  of  these  human  acts  no  statesman  nor  any  professor  of 
sociological  science,  with  many  years  in  which  to  do  so,  has 
yet  been  able  to  foresee.  Still  less  can  they  be  attributed  to 
any  conscious  intent  upon  the  parts  of  these  originators  of 
trouble.  Meek,  modest  lovers  of  craft  and  mankind!  They 
would  rather  have  burned  their  models  and  died  unknown,  had 
they  been  conscious  of  the  burden  of  international  war  and 


THE  AUTHOR'S  POINT  OF  VIEW  717 

internal  discontent  which  they  were  foisting  upon  the  world, 
merely  by  making  two  lives  possible  where  only  one  could 
exist  before. 

It  is  the  common,  tacit  assumption  by  virtually  all  educated 
persons  that  social  evolution  in  general,  and  revolution  in 
particular,  is  a  voluntary  act,  promoted  by  agitation  and  guided 
by  public  opinion.  Yet  in  support  of  this  assumption  the 
author  can  find  no  atom  of  evidence  in  recent  history.  He  can- 
not discern,  in  the  evolution  of  any  war  or  revolution  of  recent 
centuries,  any  government,  or  political  party,  or  school  of 
philosophy,  or  even  leading  statesman,  who  either  succeeded  in 
guiding  the  course  of  events  along  the  path  which  he  had 
selected,  or  who  was  able  even  to  discern  whither  it  was  going 
of  its  own  will. 

If  the  procession  of  events  was  in  truth  driven  and  guided 
by  whim,  it  was  other  than  human  whim.  For  everywhere  events 
led,  followed  only  tardily  by  a  public  opinion  which  often  had 
to  turn  somersaults  overnight  in  order  to  keep  in  touch  with 
them. 

In  all  sciences,  sociology  included,  the  ability  to  predict 
necessarily  precedes  the  ability  to  control.  We  do  not  find  a 
steamship  manageable  unless  she  maneuvers  as  her  designer 
predicted  she  should.  In  our  recent  science  of  meteorology,  for 
instance,  we  have  attained  fair  power  of  prediction;  yet  we 
wield  not  an  atom  of  control,  as  yet,  over  the  weather. 

In  the  science  of  social  energetics  we  possess  neither  the 
power  to  control  nor  even  the  ability  to  predict.  We  never 
know  what  is  going  to  happen  next,  and  buy  hourly  editions  of 
newspapers  to  try  to  find  out — with  the  man  who  buys  the 
most  papers  knowing  the  least. 

Therefore  it  must  be  recognized  in  every  man's  thoughts  that 
revolutions  do  not  come  from  voluntary  uprisings.  If  they  did, 
every  one  of  them  would  have  followed  a  course  vastly  different 
from  its  actual  one. 

So  sweeping  is  the  support  of  this  broad  statement  by  past 
history  that  only  one  apparent  exception  can  be  found.  This 
is  the  revolution  of  1848.  But  this  revolution  of  1848  is  the 
one  revolution  of  history  which,  in  an  effective  sense,  was  no 
revolution.  That  is  to  say,  it  did  not  revolve,  nor  even  evolve, 
anything.  No  form,  nor  even  policy,  of  government  was  changed 


718  MODERN  ECONOMIC  TENDENCIES 

thereby.  The  revolution  was  easily  put  down  by  force,  leaving 
matters  for  the  proletariat  worse  than  they  were  before. 

Political  Democracy  and  Economic  Oligarchy.-— Also,  if 
the  reader  and  the  author  are  to  derive  any  mutual  benefit 
from  the  following  chapters,  it  must  be  clearly  recognized  that 
attack  upon  the  existing  economic  regime,  which  is  the  very 
antithesis  of  democracy,  is  no  attack  upon  our  American  political 
democracy  at  all,  but  a  defense  of  it  from  its  direst  menace. 

Carved  upon  the  rocks  upon  a  mountain-top,  near  the  city 
of  the  author's  alma  mater,  still  survives  the  motto  scratched 
there  by  the  regicide  judges  of  Charles  I,  to  whom  the  cave 
gave  shelter  in  concealment  after  their  flight  to  America :  "Re- 
sistance to  tyrants  is  obedience  to  God  I"  There  is  no  tyranny 
extant  to-day  so  hateful  to  God  as  is  the  desecrating  power  of 
the  money-changers  who  have  intruded  into  the  temple  of 
American  democracy.  The  fact  that  no  individual  member  of 
this  tyrannous  institution  may  be  conscious  of  the  tyranny  of 
his  collective  acts,  as  a  personal  tyrant  of  earlier  centuries 
would  have  been,  has  nothing  to  do  with  the  iron  despotism 
of  the  institution's  subconscious  results. 

This  New  Year's  Day  of  1920  brings  out  two  expressions  of 
patriotic  faith  from  officials  of  the  American  government  which 
deserve  to  live.  One  of  them,  from  Secretary  Lane,  we  quote : 

"I  wish  that  1920  may  be  a  Lincoln  year,  in  which  our 
people  will  learn  to  look  at  things  through  Lincoln's  eyes — 
those  kind,  steadfast,  honest  eyes — in  which  there  was  neither 
malice  nor  envy,  but  a  great  sympathy  in  a  noble  common 
sense.  Why  can't  we  make  this  1920  a  Lincoln  year?" 

We  not  only  can;  we  shall  be  forced  to  do  so.  But  let  us 
re-impersonate  Lincoln  himself,  and  not  re-impersonate,  as  we 
are  now  doing,  the  blind,  silly,  cruel  public  of  Lincoln's  day. 
For  the  public  of  1856-63  saw  no  halo  around  Lincoln's  head, 
as  we  do.  Because  he  dared  to  attack  intrenched  profits  he  was 
hated,  misunderstood,  cartooned,  vilified,  and  finally  assassinated. 

There  is  no  such  educational  feature  as  to  American  history 
in  existence  as  the  collection  of  Lincoln  cartoons  in  the  Con- 
gressional Library  at  Washington.  Yet  its  lesson  is  as  little 
heeded  by  Congress  as  it  is  by  the  run  of  American  people  who 
flock  to  Lincoln-celebrations,  venerating  a  false  idea  of  what 


THE  AUTHOR'S  POINT  OF  VIEW  719 

he   did,   while   crucifying  every  present  manifestation  of  the 
Lincoln  spirit  which  they  can  find  daring  to  raise  its  head. 

But  let  us  not,  while  forgetting  what  the  people  of  Lincoln's 
day  did  to  Lincoln,  also  go  astray  as  to  what  Lincoln  himself 
did.  Thus  the  common  idea  of  his  career,  picturing  his  youth- 
ful trip  on  a  flatboat  to  New  Orleans — where  he  doubtless  saw 
slavery  and  supposedly  formed  the  resolution  to  do  away  with 
the  institution  as  soon  as  he  had  the  power,  and  of  his  de- 
liberate accomplishment  of  that  purpose  later,  when  he  had 
attained  presidential  authority — is  largely  fairy-tale.  Nor  is 
it  as  innocent  a  fabrication  as  are  most  fairly-tales,  for  it  is 
leading  our  ideas  widely  astray  in  our  present  crisis. 

Lincoln  doubtless  went  to  New  Orleans,  doubtless  saw  slavery, 
and  doubtless  hated  it  in  his  heart.  But — knowing  better  than 
any  other  man  what  was  involved — if  he  ever  had  the  purpose 
to  abolish  it,  he  concealed  the  fact  most  carefully  from  his 
every  public  utterance.  His  famous  debates  with  Douglas,  in 
1858,  upon  the  territorial  restriction  of  slavery's  expansion, 
which  won  him  the  presidential  nomination  in  1860,  certainly 
made  no  mention  of  it.  He  certainly  never  avowed  it  to  the 
Republican  party,  before  accepting  the  nomination,  as  he  is 
just  now  being  depicted  upon  the  stage  as  doing.  The  platform 
upon  which  he  was  elected  certainly  did  not  avow  any  such  a 
purpose. 

Not  only  are  these  negative  statements  true.  Lincoln  openly, 
repeatedly  disavowed  any  right  or  intent  to  touch  slavery,  other 
than  to  restrict  its  expansion  into  federally  governed  territory. 

If  all  this  had  not  been  so,  Lincoln  could  never  have  been 
elected  president.  In  1860  public  opinion,  which  only  four 
years  before  had  systematically  persecuted  the  abolitionists,  was 
very  far  from  tolerating  abolition.  It  was  not  until  Fort 
Sumter  had  been  fired  upon,  some  six  months  later,  that 
Northern  sentiment  took  a  longer  leap  toward  abolition,  within 
a  week,  than  it  had  progressed  by  agitation  during  the  pre- 
ceding three  decades. 

It  was  only  as  recently  as  1856  that  the  North,  revolting 
against  having  the  uncomfortable  slavery-issue  thrust  upon  it, 
and  led  by  the  commercialists  in  protest  against  disruption  of 
their  profits,  had  elected  the  non-committal  Buchanan,  in  a 
"safe-and-sane,"  "peace  at  any  price"  campaign,  punctuated  by 
anti-abolitionist  mobs  and  the  Kansas  border-war  over  slavery, 


720  MODERN   ECONOMIC   TENDENCIES 

as  a  rebuke  to  the  "needless  agitation."  Fremont,  standing 
upon  the  platform  of  the  newborn  Republican  party,  which 
confined  itself  merely  to  restraining  slavery  from  expanding 
into  the  territories  under  congressional  rule,  had  been  signally 
defeated.1 

Four  years  later  Lincoln,  the  second  candidate  of  the  widely 
hated  "black  Republican"  party,  was  able  to  gain  the  election, 
however  aided  by  advance  in  public  opinion,  only  because  he 
stood  squarely  for  even  greater  self-restraint  than  Fremont's. 
He  was  never  officially  an  abolitionist  before  he  entered  the 
White  House,  and  not  for  some  eighteen  months  thereafter. 

Even  as  late  as  August,  1862,  sixteen  months  after  the 
opening  of  actual  war  and  nearly  two  years  after  the  secession 
of  South  Carolina — by  which  act  slavery  had  fully  shown  its 
hand — Lincoln  officially  declared  his  duty  to  be  the  perpetua- 
tion of  slavery,  if  by  that  means  he  could  perpetuate  the  Union. 
Yet  within  another  five  months  he  had  proclaimed,  as  a  war- 
measure  requisite  for  the  preservation  of  the  Union,  the  aboli- 
tion of  slavery! 

Lincoln  was  not  only  wise,  moderate  and  charitable.  He 
was  forceful.  It  was  he  more  than  Grant  who  fought  the 
war  through  to  "unconditional  surrender."  But  all  his  wisdom, 
moderation,  charity  and  force  of  character  did  not  suffice  to 
keep  us  out  of  war — did  not  succeed  in  forefending  us  from  a 
crisis  wherein,  in  his  own  words,  doubt  arose  as  to  whether 
a  government  of,  by  and  for  the  people  might  survive  upon 
earth ! 

It  is  to  guard  this  land  against  a  repetition  of  this  dire 
extremity,  by  urging  a  policy  more  prescient  than  Lincoln  was 
able  to  command,  in  the  crude,  unscientific  days  of  1858,  that 
this  book  is  dedicated.  But  such  prescience  could  never  tolerate 
our  present  lazy  neglect  of  the  economic  oligarchy.  It  calls  for 
the  same  determination  and  energy  of  action  now  as  we  shall 
inevitably  put  forth  under  the  stress  of  a  tottering  civilization, 
after  it  is  too  late  to  avoid  extreme  crisis. 

All  this  is  pertinent  here  because  we  have  just  reached,  as 
this  book  appears,  the  President  Buchanan  stage  of  the  evolu- 

i  The  election  of  Mr.  Harding  in  1920,  as  much  for  the  repression  of 
radical  expressions  of  economic  discontent  as  from  hatred  of  Mr. 
Wilson's  policies,  is  a  startling  parallel  with  the  election  of  Buchanan 
in  1856. 


THE   AUTHOR'S   POINT   OF  VIEW  721 

tion  of  our  pending  economic  world-crisis.  The  mass  of 
patriotic,  but  comfortable,  people,  now  for  the  first  time  forced 
to  take  cognizance  of  the  uncomfortable  issue  of  economic  in- 
justice and  inefficiency  (heretofore  recognized  only  by  "cranks"), 
is  determined  that  its  luxury  and  its  profits  shall  not  be  upset 
by  any  needless,  insane,  seditious  agitation. 

To-day  any  radical  view  whatever,  whether  true  or  false, 
acts  upon  the  public  as  a  red  rag  upon  a  bull.  The  whole 
policy  of  the  day  is  to  rely  upon  repressing  by  force  a  dis- 
content which,  driven  by  expanding  world-commercialism,  is 
rising,  the  world  over,  as  naturally,  relentlessly  and  uncontrol- 
lably as  the  tide  under  the  pull  of  the  moon.  The  majority  of 
all  Americans  wish  neither  to  do  economic  justice,  nor  even  to 
stop  and  investigate  what  justice  requires  of  them.  They  wish 
merely  to  get  back  to  the  comfortable  peace  of  two  decades 
ago.  Impossible ! 

In  this  perilous,  pregnant  situation  let  us  indeed  commit 
ourselves  to  Lincoln's  policy  of  "malice  toward  none  and  charity 
toward  all";  but  let  us  never  forget  that  Lincoln's  wisdom 
did  not,  could  not,  keep  us  out  of  war.  Slavery — for  centuries 
approved  by  the  Bible  and  tradition,  and  protected  by  the 
American  Constitution  and  statute  law — had  reached  the  time 
when,  energized  by  modern  invention,  it  had  grown  into  a  huge 
abuse  which  had  to  be  abolished,  else  the  government  must 
fall.  But  it  was  not  merely  the  South  which  decreed,  by  its 
acts,  that  the  method  of  slavery's  abolition  must  be  war.  It 
was  the  lazy,  greedy  neglect  of  humanity's  rights  by  the  prosper- 
ous North  which  contributed  equally  to  that  lamentable  fate. 

To-day  commercialism  is  playing  exactly  the  role  which 
slavery  played  yesterday.  Energized  by  modern  invention,  it 
has  grown  into  such  a  huge  abuse  that  it,  and  not  its  natural 
child — discontent — is  about  to  enforce  its  own  abolition.  But 
if  we  are  to  prevent  this  cataclysm  it  must  be  by  doing  some- 
thing which  Lincoln  did  not  do,  namely,  foresee  and  act  with 
a  determination  which  the  North  exerted  only  after  it  was  too 
late  to  avoid  war. 

So  vastly  more  intricate  is  our  modern  crisis  than  the  rela- 
tively simple  one  of  slavery  that  there  would  be  no  slightest 
hope  of  our  being  able  to  do  this,  if  it  were  not  for  the  evolu- 
tion, since  Lincoln's  day,  of  our  schools  of  sociology.  In  1860 
there  was  no  science  of  sociology  to  guide  public  opinion,  nor 


722  MODERN   ECONOMIC   TENDENCIES 

even  to  predict  what  would  happen  regardless  of  attempts  to 
guide.  There  was  then  scarcely  a  single  school  of  natural 
science  in  the  land,  and  none  of  technology.  The  universities 
were  all  headed  by  theologians.  None  included  a  department 
of  sociology. 

Yet  are  we  any  better  off  to-day  ?  Where  is  the  school  which 
foresees,  or  dares  to  predict?  Where  is  the  group  of  scientific 
men  all  of  whom  agree  even  as  to  what  is  the  social  trouble 
with  us  to-day,  let  alone  the  more  difficult  question  as  to 
remedy?  Where  is  even  our  modern  Lincoln,  who  sees  clearly, 
where  other  men's  vision  is  blurred,  that  commercialism  must 
not  be  allowed  to  expand  further,  else  it  will  overturn  the 
state? 

We  shall  see,  in  the  last  chapter,  that  our  schools  of  sociology 
are  either  silent,  through  fear,  or  are  filled  with  inconsequential 
babblings.  The  Lincoln  of  the  pending  crisis  is  still  splitting 
rails  in  obscurity.  There  is  none  to  lead — merely  a  hysterical 
mob-spirit  intent  upon  repression  of  all  radicalism,  whether 
right  or  wrong,  by  force. 

In  our  perplexity  such  as  this,  is  silence,  while  the  precious 
days  flee  by  toward  inevitable  revolution,  our  only  patriotic 
policy  ?  Or  is  it  not  treason  ? 


CHAPTER  XXIV 

THE   REMEDY — CONSUMERISM   AND    CONSUMERATION 

IN  undertaking  the  prescription  of  a  panacea  for  social  ills 
it  should  be  recalled  that  the  preceding  analysis  has  concerned 
itself  only  with  those  forces  within  society  which  may  be  styled 
huge  and  raw.  The  finer  ethical  influences  at  work  in  social 
evolution  have  had  as  yet  little  consideration,,  except  to  show  that 
they  are  the  effect,  rather  than  the  cause,  of  these  cruder  forces 
— that  they  transmit  rather  than  create — that  they  are  modify- 
ing rather  than  controlling. 

Therefore  it  is  right  that  this  should  have  been  our  order 
of  procedure.  For,  however  we  may  enjoy  basking  in  our 
self-deception  as  to  the  power  of  the  individual  will  in  social 
affairs,  these  grosser,  subconscious  forces  have  so  far  shown 
themselves  unquestionably  as  the  ones  in  control.  It  is  they, 
and  not  some  obscure,  delicate,  psychic  reactions  within  the 
individual,  which  first  determine  the  destiny  of  society.  It 
is  they  which  create  public  opinion — transform  it,  turn  it 
inside  out,  or  over-ride  it  brutally — always  despotically  and 
sometimes  suddenly — as  a  preliminary  to  public  action. 

Ethical  forces,  it  is  true,  must  be  relied  upon  by  society  for 
the  rapid  and  delicate  transmission  of  momentary  social  im- 
pressions throughout  its  frame,  with  the  sensitiveness  of 
electricity — and  with  its  fleetingness,  too.  Indeed,  electricity 
is  an  accurate  parallel  with  public  opinion ;  for  electricity,  often 
called  "that  great  power,"  which  drives  our  trains  and  lights 
our  streets  and  homes,  and  carries  our  messages,  is,  in  fact, 
no  slightest  source  of  power.  Every  microwatt  we  use  we 
have  to  make,  either  from  steam  or  water-power.  Electricity 
is  a  mere  transmitter  of  energy  derived  from  other,  and  far 
more  sordid,  sources. 

So  is  public  opinion.  It  never  created  a  single  social  force, 
although  it  has  transmitted  many.  Its  surging  pulses  have 

723 


724  MODERN   ECONOMIC   TENDENCIES 

always  been  subconscious  reactions  to  a  train  of  events,  con- 
trolled automatically  by  natural  laws  which  we  are  now  engaged 
in  tracing. 

Therefore  all  of  which  we  may  be  sure,  in  the  face  of  our 
present  crisis,  is  that,  after  the  reform  of  present  ills  shall 
have  been  fully  effected — after  the  smoke  of  revolution  shall 
have  drifted  away — then  the  conformation  of  society  which 
alone  will  have  been  able  to  survive  the  many  shocks  and 
counter-shocks,  as  that  most  permanently  stable,  will  prove  to 
be,  not  one  in  consonance  with  any  of  the  rapidly  shifting  hues 
of  current  public  opinion,  which  now  puzzle  us  with  their 
phantasmagoria,  but  instead,  with  those  huge,  raw,  relentless, 
natural  forces  just  mentioned.  Unconscious  of  their  domina- 
tion, and  proud  of  our  supposed  free  sovereignty  over  our 
social  life,  we  may  pretend  to  be;  yet  their  furthest  brutal 
demand  must  be  met  before  any  of  the  finer  sensibilities  of 
modern  society  may  find  play.  Yet  it  will  be  the  highest  aim 
of  this  book  to  show  that  behind  all  this  apparent  brutality  of 
natural  economic  law  is  a  loving  intelligence,  always  rewarding 
co-operation  and  unselfishness  with  success,  and  dooming  selfish 
antagonism  to  failure. 

Therefore,  when  we  attempt  to  predict,  and  to  offer  remedies 
for  what  we  foresee,  we  must  pay  first  attention  to  these  all- 
powerful  underlying  crudities.  Before  we  may  drape  the  gross 
nakedness  of  the  real  social  vitalities  with  a  veil  of  art,  literature, 
ethics  or  religion  it  is  necessary  to  study  well  their  posed 
nudity,  and  to  consider  well  the  underlying  rigidity  of  bone 
and  bulging  brutality  of  muscle. 

Thus  the  society  which  we  might  mold  synthetically,  directly 
from  a  study  of  these  raw  anatomies,  may  correspondingly  have 
the  appearance  of  a  community  of  grotesque,  cyclopean  giants, 
it  is  true.  It  may  resemble  a  tribe  of  huge  manikins  whose 
wires  receive  their  impulses  from  a  modern  power-house,  rather 
than  a  civilized  and  cultured  state.  But  it  will  at  least  possess 
the  primary  virtue  of  fidelity  to  natural  law,  of  unlimited 
power  and  stability,  and  of  justification  in  actual  practice, 
rather  than  the  impotence  and  irresponsibility  of  those  vapor- 
ings  which  base  themselves  upon  momentary  conscious  public 
opinion,  national  character,  racial  tendencies,  psychic  reactions, 
esthetic  ideals,  or  the  like — and  then  never  come  true. 

It  may,  indeed,  the  better  make  clear  to  us  how  it  is  that 


THE  REMEDY — CONSUMERISM  AND   CONSUMERATION       723 

modern  society,  even  in  its  most  cultured  portions,  where  art 
and  ethics  have  received  most  careful  nurture,  should  at  times 
break  forth  into  whirlwinds  of  blind  and  brutal  cruelty,  sur- 
passing that  of  the  savage — or  worse,  that  of  a  relentless  autom- 
aton, driven  by  forces  which  we  can  neither  see  nor  under- 
stand, as  implacable  as  a  machine  in  motion.  Our  synthetic 
studies  may  resemble  the  army  of  Goths  invading  Rome — crude 
and  vigorous,  destroying  many  delicate  fabrics  of  cherished 
tradition,  and  false  if  beautiful  ideals;  but  bearing  in  its 
wholesome  freedom  from  cant  and  superstition  the  seed  of  a 
social  destiny  far  higher  than  Rome  knew  how  to  dream. 

Political  Democracy. — It  is  now  almost  exactly  one  hundred 
and  forty  years — more  than  four  generations  of  men — since  the 
founders  of  this  nation  enunciated  to  the  astonished  world  a 
basic  principle  of  political  organization  which  was  then  re- 
garded by  all  the  orthodox  philosophers  and  pillars  of  govern- 
ment (chiefly  in  Europe)  as  novel,  fantastic,  foolish  and  danger- 
ous in  the  extreme.  To  their  minds  it  was  radicalism  carried 
to  the  nth  degree.  It  was  accorded  the  death-sentence,  so  that 
our  colonial  fathers  grimly  jested :  "If  we  don't  hang  together 
we  shall  all  hang  separately." 

Yet  this  principle  was  the  one,  in  fact,  upon  which  the 
Goths  and  Vandals  had  fought  their  way  into  Rome,  upon 
which  the  Saxons  had  invaded  Britain,  upon  which  the  barons 
had  forced  the  hand  of  King  John,  upon  which  the  privateers 
of  Queen  Elizabeth's  day  had  driven  Spanish  tyranny  from 
the  high  seas,  and  upon  which  the  Puritans  overcame  that  most 
unrelenting  enemy  of  all,  New  England's  soil  and  climate — 
compared  with  which  King  George's  troops  were  easy.  But 
never  before  1776  had  this  principle  been  enunciated  broadly, 
consciously  and  deliberately,  as  a  rule  upon  which  to  base  the 
design  of  a  government  in  stability  and  liberty.  This  principle 
was  that  the  only  just  and  equitable  power  of  political  govern- 
ment springs  from  the  consent  of  the  governed. 

After  these  one  hundred  and  forty  years  of  experience  since 
then  with  a  government  so  founded,  its  citizens  have  no  doubt 
as  to  the  proof  of  the  formula.  We  have  seen  France  copy 
our  lead  in  1793,  and  again  in  the  nineteenth  century,  and 
have  watched  that  country  thrive  thereon  from  one  of  the  most 
unstable  and  oppressed  to  one  of  the  freest  and  best  balanced 
of  nations.  We  have  seen  the  principle  justify  itself  in  our 


726  MODEKN   ECONOMIC   TENDENCIES 

own  internal  struggle  of  sixty  years  ago,  centering  at  Gettys- 
burg, which  called  forth  Lincoln's  immortal  characterization  of 
the  Civil  War  in  terms  of  that  principle. 

We  are  now  witnessing  the  fate  of  a  nation  and  a  civiliza- 
tion, the  German,  which,  the  most  efficient  upon  earth  in  some 
respects,  has  yet  gone  wildly  astray  in  a  horribly  inefficient 
blunder  (to  put  it  cold-bloodedly)  because  it  had  failed  to 
adopt  that  principle  at  the  proper  time,  in  a  baptism  in  its 
own  blood,  as  we  did  in  1776  and  as  France  did  in  1793.  So 
it  must  do  so  now,  with  shame  added  to  agony  as  the  price 
of  its  delay. 

Almost  one  hundred  and  fifty  years  of  fighting  have  been 
required  to  establish  beyond  question  that  principle  announced 
in  1776.  We  had  thought  that  the  revolution  of  that  year  in 
America,  and  that  of  some  thirteen  years  later  in  France,  had 
sufficed  to  settle  its  extension  over  all  the  territory  of  a  nation; 
but  we  found  our  error  in  this  in  1861. 

We  then  thought  that  our  Civil  War  had  extended  it  over 
all  races  in  America.  We  did  not  then  realize  that  there  yet 
remained  a  still  larger  fight — to  extend  it  over  all  continents 
and  countries  therein.  For  we  live  to-day  in  a  de  facto  world- 
community,  and  the  only  community  which  can  survive  to-day 
is  a  democratic  one. 

Economic  Democracy. — Yet  now  again  (supposing  the  Great 
War  finished)  there  arises  before  this  nation  of  ours,  the  United 
States,  the  world's  leader  in  commercialism — or  arises  before 
that  greater  world-democracy  which  may  be  born  of  the  Great 
War — the  duty  of  again  enunciating  this  principle.  But  this 
time  it  is  to  extend  its  application  into  a  new,  a  still  more 
advanced  field — a  field  far  beyond  the  political  field,  even  when 
spanning  oceans — a  field  as  far  in  advance  of  that  now  formally 
recognized  for  it  as  the  American  Revolutionary  doctrines  of 
political  democracy  were  in  advance  of  European  public 
opinion  of  that  day.  This  field  of  democracy  now  in  question 
is  that  of  economics,  covering  every  conceivable  question  of 
industry,  commodities,  interchange  and  service. 

For  in  that  field  the  Ultimate  Consumer  occupies  the  same 
position  of  natural  sovereignty  and  inborn  authority  that  the 
Voter  occupies  in  the  political  field.  In  economics  the  pur- 
chase made  by  the  Ultimate  Consumer  is  his  vote,  whereby  he 
registers  his  individual  will  as  to  matters  economic — and  by 


THE   REMEDY — CONSUMERISM   AND   CONSIDERATION       727 

which  he  simultaneously  contributes  his  quota  of  support  to 
the  economic  nation — just  as  his  political  vote  registers  his 
will  as  to  matters  politic,  and  enrolls  him  for  service  in  sup- 
port of  the  political  nation. 

Therefore  we  must  somehow  attain,  at  whatever  cost,  a  formal 
recognition  in  our  constitutional  law  of  this  basic  principle 
that :  In  the  economic  field  the  Ultimate  Consumer  is  Sovereign 
and  Proprietor.  We  must  somehow  incorporate  into  our  in- 
stitutions the  fact  that  the  sole  justice  back  of  these  huge, 
crude,  governing  powers  which  find  expression  in  retail  prices, 
quantities  of  commodities,  facility  of  communication,  wages, 
volume  of  employment,  and  industrial  organization — defying 
as  yet  our  every  effort  at  their  control — rest  squarely  upon 
the  consent  and  desire  of  him  who  supplies  all  economic 
power  in  the  raw,  and  whose  mandate  across  the  shop-counter 
as  to  what  he  will  or  will  not  consume  must  always  stand  as 
the  ultimate,  despotic  authority  over  all  industry  and  all  in- 
terchange— the  Ultimate  Consumer. 

Economic  Taxation  without  Representation.— It  must  be 
announced  (as  a  preliminary  to  its  enforcement)  that  taxation 
without  representation  is  as  intolerable  in  economic  as  it  is 
in  political  fields.  The  patriotism  of  American  citizens  will 
no  more  endure  permanently  the  imposition  of  higher  and 
higher  prices,  and  the  collection  of  unearned  tribute  in  the 
form  of  rent,  interest,  dividends,  profits  and  surplus,  by  authori- 
ties in  which  he  shares  no  representative  power,  than  it  did 
the  same  species  of  tyranny  when  imposed  by  King  George  III. 
In  neither  case  is  the  development  of  revolt  immediate;  but 
in  neither  case  is  it  voluntary.  In  each  case  it  is  inevitable. 

Economic  Elective  Liberty. — The  free  selection  of  goods 
or  service  by  the  Ultimate  Consumer,  without  any  interference 
due  directly  or  indirectly  to  ownership-in-industry,  must  be 
protected  by  society  with  the  same  diligence  and  dignity  as  the 
freedom  and  purity  of  the  ballot  is  now  protected.  Complete 
freedom,  assured  through  unquestioned  authority  and  unlimited 
power,  must  accompany  each  of  these  parallel  acts — the  ballot 
and  the  purchase — else  liberty  and  democracy  totter  in  either 
case. 

Post- War  Problems. — After  the  Great  War  social  problems 
will  press  upon  us  increasingly.  Even  now  internal  forces 
promise  to  outrank  international  ones  in  the  settlement  of 


728  MODERN   ECONOMIC   TENDENCIES 

peace.  But  when  we  analyze  these  social  problems  carefully 
it  appears  that  they  are  all  traceable,  more  or  less  directly,  to 
a  gradual,  but  continuous  and  accelerating,  departure  of  our 
national  life  from  this  duty  of  maintaining,  in  the  field  of 
economics,  this  only  correct  principle  of  individual  sovereignty, 
liberty  and  power  of  the  Ultimate  Consumer. 

For  formerly,  when  the  Consumer  produced  with  his  own 
hands  the  bulk  of  what  he  consumed,  or  traded  only  with  his 
immediate  neighbors,  he  was  still  sovereign  over  all  industry 
which  affected  him  personally,  in  nature's  simple  stateliness 
of  fact.  But  now  that  thousands  of  miles  of  territory,  an  in- 
tricate array  of  both  middlemen  and  middle-industries,  and  the 
whole  weight  of  commercial  and  financial  credit-organizations 
besides,  intervene  between  him  and  the  producer  of  what  he 
consumes,  he  has  become  as  helpless  as  a  serf  to  a  feudal  lord. 
Economic  society,  lacking  the  wholesome,  natural  and  stabilizing 
influence  of  the  millions,  has  become  a  sheer  autocracy — as  un- 
mitigated an  autocracy  as  any  in  history,  and  greater  than  any 
since  the  world-autocracy  of  Eome. 

For  that  reason  it  is  running  wild  to-day  in  America,  just 
as  French  autocracy  ran  wild  previously  to  1789,  just  as  our 
slave-owning  autocracy  of  1840  ran  wild  up  to  1861,  and  just 
as  German  military  autocracy  has  run  wild  until  checked  by 
the  present  war.  There  is  every  sign  that  after  the  war  is  over 
our  commercial  autocracy — which  has  received  therefrom  a 
lengthened  leash  in  the  form  of  hundreds  of  billions  of  addi- 
tional credit,  and  a  stimulated  international  trade — will  run 
still  more  wild  than  before. 

Since  in  magnitudes  of  energy  involved  our  present  com- 
mercial autocracy  far  exceeds  any  of  these  autocracies  of  the 
past,  not  excluding  even  that  of  Eome,  there  is  every  prospect 
that  its  collapse — inevitable  soon,  unless  adequate  measures  in- 
tervene— will  bring  a  more  horrid  reaction  into  temporary 
anarchy  than  has  followed  any  of  these.  At  least,  it  will  spread 
itself  over  a  larger  area  and  population. 

Yet  all  that  was  ever  needed,  in  order  to  check  any  of  these 
earlier  autocracies  before  they  had  developed  into  world-horrors, 
was,  in  the  first  place,  their  prediction;  and  then,  as  the  result 
of  that,  the  return  to  the  millions  of  their  temporarily  usurped 
sovereignty,  by  the  prompt  organization  of  a  truly  democratic 
form  of  government. 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION        729 

Economic  Preparedness. — In  our  present  economic  autocracy 
the  situation  is  the  same.  If  we,  now  citizens  of  the  largest 
unitary  economic  community  which  history  has  ever  recorded, 
are  to  avoid  another  impending  world-horror  more  gigantic 
than  any  which  have  preceded,  then  we  must  embody  immedi- 
ately in  our  economic  organization  the  natural  sovereignty  of 
the  hundreds  of  millions  of  Ultimate  Consumers,  over  all 
matters  industrial  and  commercial,  in  a  carefully  designed 
economic  democracy. 

This  we  already  possess  full  right  and  equity  to  do.  For 
at  all  previous  periods  the  Consumer  has  been  paying  (if  on  a 
smaller  scale)  what  he  is  paying  to-day,  namely,  every  con- 
ceivable  industrial  and  commercial  cost — proper  or  improper — 
wages,  raw  material,  profits,  interest,  rent,  dividends,  selling- 
costs,  graft,  adulteration,  and  finally  surplus.  Hence  it  has  now 
come  to  pass  that  he  is  now  furnishing,  and  for  some  time  past 
has  furnished,  all  capitalism. 

Therefore  there  does  not  now  exist  in  the  economic  field 
any  atom  of  physical  plant,  nor  any  scrap  of  paper  security, 
which  is  not  already  his,  in  equity,  by  right  of  past  purchase 
for  cash,  paid  down  in  advance  across  the  shop-counter.  There 
is  not  a  share  of  stock,  a  bond,  a  note  nor  a  mortgage  which 
would  be  in  negotiable  existence  to-day,  except  as  his  property, 
had  he  always  had  preserved  to  him  his  sovereign  right  to  say 
how  and  where  his  own  money  should  be  spent.  There  has 
never  been  a  time  when  he  did  not  have  the  fullest  birth-right, 
however  he  may  have  lacked  the  legal  power,  for  saying  how 
every  penny  of  his  annual  multi-billions  of  expenditure  should 
be  invested,  throughout  every  nook  and  corner  of  the  industro- 
commercial  system. 

As  noted  repeatedly  above,  it  is  not  the  business  of  this  book 
to  advocate  confiscation,  nor  any  other  over-drastic  method. 
It  is  not  even  its  function  to  dictate  any  method  of  procedure 
for  securing  re-expression  of  this  popular  birthright  which  has 
been  temporarily  lost.  That  is  a  question  fit  to  tax  the  ablest 
administrative  heads  which  the  present  generation  of  men  may 
produce.  The  author's  function  is  merely  that  of  the  con- 
scientious student,  intent  upon  supplying  said  administrative 
men  with  accurate  and  adequate  facts  upon  which  they  may 
base  their  decisions. 

It  is  our  first  duty,  in  the  exercise  of  this  function,  to  record 


730  MODERN   ECONOMIC   TENDENCIES 

the  historical  fact  that  this  natural  birthright  of  the  Ultimate 
Consumer  has  always  existed,  but  that  its  effective  expression 
has  gradually  been  lost  to  the  people. 

The  second  historical  fact  to  be  recorded  is  that  man  possesses 
no  free  will  to  choose  whether  he  will  regain  such  an  Morn 
right  or  not.  He  has  no  more  to  say  as  to  such  recoveries  of 
social  equilibrium  than  he  has  as  to  the  balance  always  main- 
tained by  nature  between  the  sexes,  for  instances,  after  the 
males  have  been  decimated  by  war.  This  right  must  be  re- 
gained, either  by  reason  or  by  force  of  automatic  cataclysm. 
The  human  will  has  power  only  to  choose  between  these  two 
methods. 

As  the  decades  have  passed,  the  people  have  allowed  this 
birthright,  through  no  greater  sin  than  neglect  in  the  face  of 
changing  conditions,  to  slip  from  their  hands.  It  is  in  this 
gradual  loss  that  our  civilization  has  been  becoming  steadily 
poorer — in  poise  and  contentedness,  where  not  in  money. 
Gradually  our  noble  body  economic,  having  lost  its  wholesome 
contact  with  soil,  labor  and  reward,  has  gone  partially  insane. 
It  has  already  begun  to  clutch  at  gravel-stones  for  food,  while 
surrounded  by  a  garden  of  plenty — clawing  murderously  at 
its  own  vitals  with  frenzied,  unshorn  finger-nails,  because  it  is 
hungry  and  can  see  no  food  to  satisfy — no  opportunity  to  labor 
in  a  world  needing  endless  labor. 

Nor,  in  saying  these  things,  is  reference  had  only  to  the 
nominally  poor.  All  of  us  have  suffered ;  and  in  some  ways  the 
rich,  and  certainly  the  impecunious  cultivated,  have  suffered 
most. 

Economic  Shrewdness. — Thus  Mr.  Eockefeller  has  been  re- 
ported as  being  a  billionaire.  Yet  will  anyone  contend  for 
an  instant  that  Mr.  Eockefeller,  in  amassing  his  oil-properties, 
while  at  the  same  time  abandoning,  as  he  has  done,  his  own 
proper  share  in  the  ownership,  control  and  enjoyment  of  every 
other  industrial,  commercial  and  technical  property  in  the  land 
— which  is  rightfully  his  in  his  role  of  Sovereign  Consumer — 
has  made  anything  else  than  an  almighty  poor  bargain? 

Mr.  Eockefeller  is  not  nearly  so  shrewd  as  he  is  credited  with 
being.  The  man  who  would  consciously  sell  out  all  this  birth- 
right for  a  paltry  billion  would  be  an  utter  fool.  For  his 
entire  billion,  even  if  he  could  expend  it  all  at  once,  could 
never  buy  him  what  the  lost  share  in  economic  democracy 


*THE  REMEDY — CONSUMERISM  AND  CONSUMER ATION   731 

would  have  brought  him — peace,  the  fullest  opportunity  for 
the  exertion  of  the  best  that  is  in  him,  the  fullest  reward  with 
the  value  of  all  which  he  had  produced,  the  respect  of  the  com> 
munity,  the  certainty  of  comfort  in  old  age,  the  consciousnes/r 
of  never  having  overstepped  the  equities  toward  his  fellowmen, 
and  reliance  upon  a  stable  society  in  which  to  grow  old — not  to 
mention  a  tremendous  supply  of  novel,  purchasable  comforts 
which  one  cannot  now  get  on  the  market  at  all. 

And,  if  rumor  is  to  be  trusted,  Mr.  Rockefeller,  unconscious 
as  he  must  be  of  the  details  of  his  bad  bargain  as  set  forth 
in  this  book,  is  none  the  less  suffering  keenly  from  its  fruits. 
Yet  he  is  now  too  old  to  reconsider  his  course  in  life.  But  the 
younger  businessmen  still  have  a  chance  to  debate  whether 
their  daily  success  in  business  is  not,  after  all,  the  most  losing 
game  they  could  play. 

Consumerism. — To  the  doctrine  which  advocates  the  asser- 
tion by  the  Ultimate  Consumer  of  these  his  basic  rights,  namely, 
to  control  by  ownership  acquired  through  economic  as  con- 
trasted with  political  processes,  every  feature  of  those  huge 
economic  forces  which  he  himself  has  set  into  motion,  by  his 
own  good  money — yet  which  now  govern  him  tyrannically, 
relentlessly  and  invisibly — may  be  given  the  name  consumerism. 

For  this  doctrine  a  new  word  is  inevitable.  There  is  no 
existing  word  for  expressing  it. 

The  word  co-operation  may  occur  to  some  as  proper;  but  the 
word  co-operation,  like  socialism,  nationalism  and  several 
others,  has  already  been  given  such  a  wide  variety  of  uses  as 
to  have  ruined  utterly  its  accuracy  of  significance  in  any  one 
of  them.  Thus  the  term  co-operation  is  used  frequently  to 
include  combinations  of  producers.  Yet  a  prime  aim  in  the 
term  consumerism  is  to  exclude  specifically  the  producers  from 
participation  in  organized  economic  sovereignty.  The  producers 
as  Consumers  are  of  course  to  be  assured  their  proper  authority. 
But  as  producers  they  are  properly  slaves  to  themselves  or 
others  for  whom,  as  Consumers,  they  may  produce. 

Although  the  idea  back  of  the  term  consumerism  does  not 
exclude  the  maintenance  of  trades-unions,  as  an  incidental 
means  for  the  unified  expression  of  opinion  of  masses  of  work- 
ingmen,  as  to  things  which  affect  all  of  them,  yet  the  remedy 
for  such  common  injustices  as  this  may  reveal  must  be  accom- 


732  MODERN   ECONOMIC   TENDENCIES 

plished  through  the  activities  of  these  same  workingmen  in 
their  role  of  Consumer. 

Thus  the  author  is  now  a  member  of  his  own  national,  pro- 
fessional organization,  pledged  to  the  advancement  of  that  pro- 
fession. But  the  last  thing  with  which  this  organization  should, 
or  does,  busy  itself  is  the  improvement  of  the  economic  status 
of  its  members,  relatively  to  other  professions. 

The  same  applies  to  the  machinists,  bricklayers,  etc.  If  all 
of  them  could  appreciate  the  truth  that  all  their  unionism, 
strikes,  etc.,  better  their  condition  only  at  the  expense  of  other 
trades  of  workingmen,  their  enterprise  would  soon  alter  its 
aims.  It  is  only  as  Ultimate  Consumers  that  any  of  us  can 
ameliorate  our  economic  condition  without  making  that  of  our 
fellow-citizens  worse. 

To  the  common  statement  of  the  orthodox  socialists  and 
trades-unionists  that,  under  the  reformed  society  which  they 
seek  in  the  name  of  the  producers,  all  will  be  such,  there  is 
opposed  here  the  broader  statement  that,  under  a  properly 
reformed  society,  all  will  equally  be  Consumers.  More,  that 
even  to-day  all  are  already  Consumers. 

For  one  of  the  heavy  indictments  against  socialism,  as  a 
practicable  program,  is  that  it  plans  to  found  society  upon  a 
basis  which  can  exist  only  after  the  revolution  has  been  com- 
pleted— and  such  changes  require  years  for  their  accomplish- 
ment. It  is  planning  to  build  a  bridge  to  a  happier  land  out 
of  materials  all  of  which  lie  collected  upon  the  opposite  bank 
of  the  river. 

Because,  under  even  the  most  ideally  reformed  society,  not 
all  can  be  producers,  yet  to-day  all  are  Consumers — and  through- 
out all  the  anarchy  of  interregnum  between  the  old  and  the 
new  will  continue  to  be  Consumers — this  plan  of  governing 
through  the  Consumer,  rather  than  through  the  producer,  is 
urged  as  obviously  more  practicable,  more  democratic,  more 
humane  and  more  just. 

Postponing  more  detailed  argument  until  later,  it  is  an 
axiom  in  the  premises  that  this  is  the  proper  line  of  pro- 
cedure, because  it  is  the  taste  of  the  Consumer,  expressed 
from  instant  to  instant  across  the  shop-counter,  which  must 
guide  all  industry.  Without  this  guidance  a  factory  of  ten 
thousand  skilled  workmen,  say,  working  industriously  through 
three  hundred  ten-hour  days  per  year,  would  yet  have  "pro- 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       733 

duced"  nothing  but  rubbish,  because  no  one  would  buy  it. 
They  would  have  ceased  to  be  producers  at  all,  however  regu- 
larly they  might  draw  their  wages.  They  would  be  impoverish- 
ing the  pur  chasing -power  of  every  real  producer  in  the  land. 

The  word  co-operation  has  also  been  used  to  include  almost 
every  conceivable  degree  of  commercialism.  The  average  so- 
called  co-operative  society  is  merely  an  enlarged  commercial 
firm,  run  solely  for  the  benefit  of  the  firm-members,  rather 
than  for  the  community  as  a  whole.  Indeed,  some  nominally 
co-operative  enterprises  are  undisguised  in  their  commercialism, 
making  large  profits  and  declaring  dividends  as  unblushingly 
as  any  other  corporation. 

Socialism. — Any  suggestion  for  the  use  of  the  word  social- 
ism, for  the  new  policy  advocated  under  the  name  consumerism, 
will  raise  a  storm  of  debate  as  to  just  what  the  term  socialism 
may  mean.  As  the  author  understands  it,  consumerism  is 
diametrically  contrasted  with  socialism;  but  the  latter  word, 
particularly  when  printed  with  a  small  s,  covers  so  wide  a 
range  of  opinion,  loosely  including  many  degrees  of  antagonism 
to  divers  aspects  of  commercialism,  that  it  becomes  necessary 
to  investigate. 

But  as  to  orthodox  socialism,  with  a  capital  S,  there  can  be 
no  doubt  as  to  its  meaning  something  very  different  from 
consumerism.  For  there,  as  the  original  authority,  stands  Karl 
Marx's  "Das  Kapital,"  the  bible  of  the  orthodox  socialists, 
with  many  modernizations  by  more  recent  writers  who  do  not 
alter  its  essentials.  Then  there  is,  in  this  country,  the  Eand 
School,  of  New  York  City,  which  is  everywhere  recognized 
as  orthodox  and  the  literature  of  which  is  full. 

Finally,  for  this  country  also,  there  is  the  Intercollegiate 
Socialist  Society,  representing  the  brains  of  the  movement  and 
having  chapters  at  almost  every  university  and  college  in  the 
land.  The  list  of  members  of  university-faculties  printed  upon 
the  letter-head  of  this  organization  forms  an  imposing  array 
of  representative  intellectual  authority. 

The  sessions  of  the  New  York  City,  or  central,  chapter  of 
this  last  organization  the  author  attended  with  religious  regu- 
larity for  four  winters,  from  1910  to  1914,  in  order  to  acquaint 
himself  with  American  socialistic  belief  in  its  most  enlightened 
form.  As  a  member  of  the  organization  he  received  all  of  its 
printed  circulars. 


734  MODERN   ECONOMIC   TENDENCIES 

He  has  been  in  public  debate  at  the  Rand  School  with  Mr. 
Hillquit,  who,  as  candidate  for  the  mayoralty  of  New  York 
in  1917,  polled  the  heaviest  socialist  vote  ever  cast.  He  has 
been  in  private  discussion  with  Mr.  Benson,  socialist  candi- 
date for  president  in  1915,  Mr.  Phelps- Stokes,  former  president 
of  the  Intercollegiates,  Mr.  John  Spargo,  and  others  whose 
prominence  in  that  Society  gives  color  to  its  doctrines.  He  has 
lectured  before  the  classes  of  several  of  the  professors  whose 
names  appear  upon  the  Intercollegiate  letterhead. 

For  nearly  thirty  years  he  voted  the  ticket  of  the  Socialist 
Party — not  as  a  member  of  that  organization,  for  even  in  the 
enthusiasm  of  youth  he  could  not  bring  himself  to  subscribe 
to  its  basic  principles — but  as  the  only  way  then  available  for 
recording  a  public  protest  against  commercialism.  For  he 
always  sympathized  with  its  general  aim — antagonism  to  com- 
mercialism— and  until  recently  believed  that  it  might  be 
transformed  gradually  into  a  wise,  competent,  American 
crusade  against  that  most  autocratic  and  unamerican  of  all 
institutions — commercialism. 

For  all  these  reasons  he  believes  that  he  can  speak  fairly 
and  competently  as  to  what  socialism,  orthodox  or  intellectual, 
may  be.  He  believes  that  his  own  outline  of  what  socialism 
really  is  (given  below)  will  be  more  accurately  instructive  to 
the  reader  than  could  be  any  literal  quotation  from  the  publica- 
tions of  any  one  branch  of  the  movement. 

It  happens  that  several  of  the  most  prominent  members  of 
the  Socialist  Party  have  recently  resigned  therefrom,  publicly 
announcing  their  repudiation  of  its  alleged  pro-Germanism  and 
its  indubitable  pacifism.  Whether  these  deserters  are  still  to 
be  called  orthodox  or  not  is  hard  to  say.  Apparently  they 
are  still  orthodox  as  to  economic  doctrines,  while  recoiling 
from  the  political  views  which  (it  is  believed  here)  are  the 
inevitable  sequel  to  the  economic  errors  of  socialism. 

These  renegades  have  just  helped  to  form  a  new  socialist- 
progressive-prohibition-single-tax  coalition-party,  called  the 
National  Party;  but  whether  they  regard  this  as  being  a  truly 
socialistic  party  or  not,  one  cannot  say.  It  is  enough  to  note 
that,  whatever  they  may  call  it,  its  platform,  so  far  as  it  carries 
specific  economic  planks  relating  to  the  distribution  of  wealth, 
upholds  the  same  economic  views  which  I  found  so  unshak- 
ably  lodged  within  these  persons  during  my  four  years  of 


THE  REMEDY — CONSUMERISM   AND   CONSUMERATION       735 

contact   with   them.      These   views   are    stated    systematically 
below. 

All  this  array  of  personal  authority  for  public  views  has 
been  introduced  here  because  it  is  exceedingly  difficult,  if  not 
impossible,  to  pin  so  diversified  a  movement  as  that  of  so- 
cialism in  America  down  to  any  particular  utterance  as  official. 
There  is  none  such  which  might  be  cited  here  which  would 
not  immediately  be  repudiated  by  large  numbers  of  "socialists" 
— not  necessarily  because  they  disagreed  with  its  general  tenets, 
but  because  it  had  been  put  forth  by  some  other  branch  of 
the  movement  than  their  own,  and  might  differ  in  detail  from 
their  own  views. 

For  American  socialism  is  largely  an  uncrystallized  thing. 
It  is  a  most  significant  fact,  although  not  widely  known,  that 
for  years  not  over  one-tenth  of  the  vote  cast  for  the  socialist 
ticket  was  from  persons  enrolled  as  members  of  the  Socialist 
Party.  For  the  Socialist  is  the  only  party  in  American  politics 
which  has  always  fortified  itself  against  any  possible  modifica- 
tion of  its  basic  tenets,  to  keep  in  touch  with  the  progress  of 
the  times,  by  enforcing  subscription  to  its  fixed  doctrines  as 
a  prerequisite  to  entrance  into  membership. 

Therefore  the  author  sought  acquaintance  with  the  move- 
ment as  a  whole,  and  particularly  with  the  Intercollegiates, 
as  being  the  best  informed,  in  order  that  he  might  form  com- 
petent conclusions  of  his  own  as  to  what  are  the  essentials 
of  the  socialist  movement.  He  believes  that  the  statement  of 
these  essentials  appearing  below  runs  no  slightest  danger  of 
being  misrepresentative. 

If  any  appreciable  branch  of  the  organized  socialist  move- 
ment will  officially  repudiate  the  allegations  embodied  in  these 
tenets  ascribed  below  to  socialism,  the  act  will  be  as  welcome 
as  it  is  surprising.  But  no  mere  verbal  repudiation  will  suffice. 
The  repudiation,  if  consistent  and  sincere,  must  take  the  form 
of  a  fundamental  alteration  of  policies  and  affiliations. 

All  trades-unionism,  so  far  as  it  concerns  itself  with  the 
elevation  of  the  wage,  must  be  discouraged.  All  strikes  for 
higher  wages  must  be  denounced.  Subscription  to  the  tenets 
pre-requisite  to  membership  in  the  Socialist  Party  must  be 
renounced.  The  use  of  any  such  pre-requisites  must  be  con- 
demned, as  an  unamerican  paralysis  of  party-growth  by  sub- 
servience to  a  fixed  minority. 


736  MODERN   ECONOMIC  TENDENCIES 

Further,  the  Rand  School  must  be  actively  opposed,  as  a 
burden  to  the  poor  and  a  menace  to  the  government.  The 
views  set  forth  by  the  bulk  of  the  books  now  actively  circulated 
by  the  Intercollegiate  Society  must  be  publicly  denounced.1 

For  the  progress  of  events  has  now  brought  us  to  the  in- 
evitable parting  of  the  ways.  The  time  has  come  when  those 
serious-minded  people  whose  hearts  lead  them  into  opposition 
to  commercialism  have  become  particular  as  to  just  what 
economic  doctrine  they  are  to  offer  in  substitute  therefor.  If 
the  intellectual  socialists  cannot  see  this,  there  are  others  who 
can.  • 

Incidentally  to  his  efforts  at  the  identification  of  socialism, 
the  author  tried  earnestly  to  bend  the  views  he  met  among  the 
Intercollegiates  toward  those  set  forth  in  this  book,  as  con- 
stituting a  rational  and  patriotic  school  of  American  opposi- 
tion to  commercial  autocracy — yet  without  giving  his  doctrine 
any  name.  Overlooking  the  many  errors  in  orthodox  social- 
ism, he  sought  to  have  these  broader  views  included  within 
the  scope  of  the  term  socialism,  and  to  have  all  questions 
referred  to  some  scientific  study  of  history,  in  order  that  the 
socialistic  movement  might  be  diverted  gradually  into  truer 
channels — while  leaving  unaltered  that  unrelenting  antagon- 
ism to  commercialism,  as  a  system,  which  is  the  base  of  all 
socialistic  thought. 

But  in  all  this  his  failure  was  signal  and  complete.  Every- 
where in  socialistic  circles  dogma  rules.  Except  with  a  few 
individuals,  the  atmosphere  grew  increasingly  hostile  to  his 
efforts.  In  the  four  winters  of  monthly  or  fortnightly  meetings 
he  failed  to  secure  the  assignment  of  even  one  of  them  to  a 
study  of  the  French  Revolution,  that  illuminative  primer  of 
history  to  every  person  advocating  radical  reforms. 

If  it  be  replied  to  this  that  the  Intercollegiate  Society  has 
no  official  set  of  principles,  but  stands  merely  for  the  dis- 
semination of  literature  and  the  organization  of  chapters  in 
colleges,  the  counter-statement  is,  in  effect,  that  its  whole  func- 
tion amounts  to  such  a  standardization;  for  the  very  dis- 
semination of  doctrines  standardizes  them.  The  Society  can- 
not continue  to  organize  undergraduate  students,  placing  in 
their  hands  lists  of  books  to  be  read,  without  making  itself 

iThese  lines  were  written  some  two  years  before  the  federal  govern- 
ment's procedure  against  the  Band  School  in  June,  1919. 


THE  REMEDY — CONSUMERISM  AND  CONSUMERATION   737 

deeply  responsible  for  the  views  which  those  young  people  are 
to  imbibe  from  these  books,  and  with  which  they  will  leave 
college  and  enter  our  national  life.  It  thereby  becomes  re- 
sponsible for  our  every  national  act  during  the  near  future, 
when  these  young  people  shall  have  become  the  most  active 
stratum  of  that  most  responsible  of  all  our  layers  of  democracy 
— the  educated. 

Moreover,  the  Intercollegiates  have  incorporated  into  the 
name  of  their  society  the  word  Socialist.  They  maintain  an 
active,  if  informal,  co-operation  with  the  Eand  School,  re- 
garding whose  doctrines  there  can  be  no  doubt.  In  all  these 
ways  they  countenance,  standardize  and  actively  disseminate 
definite  views  such  that  every  citizen-patriot,  for  reasons  stated 
below,  should  oppose  them  in  every  proper  way. 

For  these  views  not  only  encourage,  they  make  inevitable, 
the  climax  of  that  bitter  "class-struggle"  which  is  destined 
shortly  to  cost  the  working-classes  millions  of  lives,  and  to 
shake  civilization  to  its  very  foundations.  Yet  this  will  occur 
without  any  permanent  enthronement  of  socialistic  institutions. 

It  is  the  erroneous  economic  philosophy  of  orthodox  Socialism 
to  which  is  due  its  growing  popularity,  in  that  it  promises 
prompt  and  easy  economic  relief.  To  this  is  due  also  its  peace- 
at-any-price  sentiment  in  international  matters,  its  class- 
struggle,  war-at-any-price,  sabotale  and  bolshevist  tendencies  at 
home,  and  hence  its  ultimate  failure.  It  is  this  erroneous 
economic  doctrine  which  is  being  actively  circulated  by  the 
Intercollegiates. 

For  them  to  say:  "We  do  not  approve  of  violent  measures" 
is  childish.  Any  belief  in  victory  for  either  side,  in  the  "class- 
struggle,"  makes  exhaustive  violence  certain.  Any  error  in  the 
fundamentals  of  political  economy,  whether  as  to  feudalism, 
slavery  or  wages,  makes  violence  inevitable.  It  is  a  vital  matter 
to  be  correct  in  political  economy. 

American  Socialism. — The  entire  socialistic  movement  in 
America,  whether  following  the  narrow,  rigid,  bigoted  path 
of  the  orthodox  Socialists  or  the  slightly  broader  outlook  of  the 
intellectual  Intercollegiates,  is  thoroughly  united,  so  far  as 
economic  philosophy  is  concerned,  upon  a  well-defined  platform 
to  which  it  adheres  tenaciously.  In  this  philosophy  the  in- 
tellectuals are  apparently  just  as  hostile  to  innovation  as  are 
their  less  educated  brethren.  All  socialistic  doctrine  in 


738  MODERN   ECONOMIC   TENDENCIES 

America,  in  whichever  camp,  or  however  differing  in  detail, 
unites  in  a  basic  faith  that: 

(1)  Production  is  the  process  carried  on  by  wage-earners 
in  factories,  the  terms  producer  and  wage-earner  being  prac- 
tically synonymous. 

(2)  The  source  of  the  hardship  of  the  poor  is  the  com- 
petitive wage-system,  because  it  involves  the  retention  of  the 
wage-earner's  "surplus  value"  by  the  employer. 

(3)  Therefore   the   distinction   between    oppressor   and    op- 
pressed  (or  "exploited")  is  a  personal  one,  demarked  between 
wage-payer  and  wage-earner. 

(4)  It  is,  therefore,  only  the  wage-earning  poor  who   are 
suffering  undeserved  hardship.     The  petty  tradesman,  who  is 
often  the  most  bitterly  pinched  of  all,  is  getting   (they  say), 
as  a  hated  "bourgeois,"  only  what  he  deserves. 

(5)  The  responsibility  for  the  presence,  the  injustice  and 
the  hardship  of  this  system  rests  (they  say)  upon  the  employer 
or  capitalistic  class,  because 

(6)  The  power  is  vested  within  this  class  to  end  this  unjust 
exploitation  by  the  granting  of  a  higher  wage  whenever  it 
will.     Indeed,  it  is  one  of  the  most  fundamental  of  all  social- 
istic beliefs  that 

(7)  The  remedy  for  all  economic  hardship  lies  in  the  eleva- 
tion of  the  wage.2 

(8)  The  fountain  of  wealth  from  which  the  wage-earner  is 
to  draw  this  comforting  elevation  of  the  .effective  wage  is  the 
riches  of  the  employer-class. 

2The  author  has  been  dared  by  Mr.  Hillquit,  in  public  debate,  to 
suggest  so  silly  an  idea  as  that  the  working-people  should  actually 
advocate  a  lower  wage.  Yet  that,  in  effect,  was  exactly  what  the 
author  was  trying  to  make  clear  to  his  audience,  as  he  has  tried  to  make 
clear  to  every  gocialist  he  ever  met,  namely,  that  only  when  the  working- 
classes  (without  necessarily  trying  to  force  wages  down)  stop  trying  to 
force  wages  up,  and  spend  their  energies,  instead,  in  organizing  them- 
selves upon  such  a  plan  (as  Ultimate  Consumers)  that  incidentally 
prices  and  wages  will  be  brought  down  together — and  prices  very  much 
faster  than  wages — then,  for  the  first  time  in  the  history  of  labor-  I 
agitation,  they  will  be  doing  something  which  brings  them  immediately 
and  permanently  a  larger  supply  of  food  and  clothing  for  a  given 
amount  of  exertion,  and  a  greater  continuity  of  employment. 

To  guide  these  blind  and  bitter  millions  into  this  narrow  pathway 
of  real  advance,  not  easily  to  be  discerned,  is  the  responsibility  now 
resting  heavily  upon  the  intellectual  socialist  and  the  professors  of  politi- 
cal economy. 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       739 

(9)  The  method  of  securing  this  elevation  of  the  wage,  and 
depletion  of  the  employer,  is  pressure  exerted  upon  the  em- 
ployer by  means  of  unions,  strikes,  legislation,  etc.,  whereby  he, 
acting  either  as  a  free  agent  or  under  duress  of  law,  is  to  cure 
all  economic  ills  by  disgorging  some  of  his  wealth  and  power. 

(10)  The   only   practicable   policy   for   setting   this   method 
into  operation   (they  believe)   is  the  furtherance  of  the  class- 
struggle.      (The  author  is  aware  that  the  socialists  disclaim 
all  responsibility  for  the  existence  of  the  class-struggle,  and 
desire  its  continuation  no  longer  than  may  be  necessary  to 
attain  victory.    All  that  consumerism  alleges  against  them,  as 
their  error,  is  their  reliance  upon  some  such  a  victory,  in  a 
contest  between  two  fractions  of  the  country,  for  their  salvation. ) 

(11)  This  struggle  for  a  better  wage  has  already  extracted 
wealth  from  the  employer-class  in  the  past  (they  believe),  and 
is  doing  so  now — else  certainly  they  would  not  continue  it. 
Also  that,  while  labor  is  far  from  having  attained  all  its  rights 
in  this  respect,  yet  that  the  immediate  returns,  even  if  un- 
satisfactory, encourage  to  further  effort. 

.  (12)  Hence  they  believe  that  gradual,  if  slow,  progress  is 
being  made  toward  an  ultimate  economic  situation  in  which 
no  surplus-value  will  be  deducted  from  the  wage,  in  a  dis- 
solving view  of  the  employer-class  gradually  melting  into  wage- 
earners,  with  the  competitive  wage-system  gone  forever. 

(13)  They  believe   that  this   class-struggle   policy   may   be 
forwarded  by  political  action. 

(14)  They  believe  that  unemployment  may  be  remedied  by 
public  works,  and  by  a  forced  reduction  in  the  time  or  rate 
of  labor  on  the  part  of  those  already  employed. 

(15)  They  naturally  believe  in  a  legislated  minimum  wage. 

(16)  From  all  of  the  above  they  believe  that  the  form  of 
society  destined  to  emerge  from  this  inevitable  conflict  will  be 
one    attained    by   voluntary    action,    perhaps    promoted    by    a 
"general  strike"  and  perhaps  aided  by  sabotage,  but  in  any 
event  one  resting  at  base  upon  the  international  organization 
of  those  who  are  now  wage-earners  into  an  economic  democracy 
built  upon  the  sovereignty  of  the  producer. 

There  is  also  to  be  added  to  this  list  of  indictments  of 
socialism  two  negative  charges,  concerning  sins  of  omission  from 
their  philosophy.  These  important  omissions  are: 


740  MODERN   ECONOMIC  TENDENCIES 

(17)  They  make,  in  their  whole  broad  plan  and  in  all  their 
diverse    literature,    no    mention    of    any    adequate    system    of 
economic  credit.    There  is  no  slightest  sign  of  their  ever  having 
grasped  the  vital  necessity  of  credit  as  a  factor  in  the  produc- 
tion of  life-support  for  the  Ultimate  Consumer. 

(18)  They  similarly  fail,  although  they  do  not  omit  so  com- 
pletely, to  make  adequate  allowance  for  the  modern  problem 
of  distribution — not  in  its  sense  of  physical  transportation  and 
subdivision  of  commodities,  but  in   that  huge   and   intricate 
problem,  fast  becoming  unsolvable  by  either  capital  or  labor, 
involved  in  the  identification,  among  the  vast  populations  now 
becoming  accessible  to  each  given  source  of  supply,  of  that  par- 
ticular Ultimate  Consumer  whose  life  may  be  supported  thereby. 
They  fail  to  recognize  that  production  has  not  been  accomplished 
until  each  commodity  has  been  placed  in  the  hands  of  the  only 
person  who  can  consume  it  usefully,  because  he  is  the  only 
person  who  wants  that  particular  thing  and  doesn't  want  other 
things. 

All  of  these  tenets  except  the  thirteenth  (which  is  not  uni- 
versally a  socialistic  belief,  although  necessarily  a  doctrine  of 
the  Socialist  Party)  become  inevitable  conclusions  as  soon  as 
the  earlier  economic  tenets  are  granted.  But  these  earlier  tenets 
have  already  been  denied,  in  effect,  in  these  pages,  as  not  being 
supported  by  any  facts  of  political  economy  unearthed  in  a 
careful,  unbiased  search — a  search  made,  indeed,  in  a  spirit 
which,  if  partial  at  all,  leaned  toward  socialism ;  for  the  author 
voted  the  socialist  ticket  for  many  years,  as  the  only  means 
then  available  for  protest  against  commercialism.  But  never, 
even  in  the  callow  enthusiasm  of  youth,  could  he  join  the  So- 
cialist Party.  The  entire  tenor  of  its  principles  repelled  him. 

These  earlier  and  more  basic  of  the  socialist  tenets  being  once 
denied,  each  and  all  of  the  later  ones  resting  thereon  must  be 
specifically  denied,  from  the  standpoint  of  Consumerism. 

Consumerism  versus  Socialism. — To  each  and  all  of  these 
socialistic  tenets  the  doctrines  of  consumerism  are  diametrically 
and  irreconcilably  opposed.  There  is  no  possibility  of  any 
compromise,  nor  of  convergence,  nor  even  of  temporary  coali- 
tion, between  the  two.  According  to  consumerism,  the  greatest 
philosophic  enemy  of  civilization  is  commercialism;  but  only 
second  to  this  is  socialism. 


THE   REMEDY — CONSUMERISM   AND   CONSIDERATION       741 

He  who  advocates  any  of  the  above  tenets  of  socialism  does 
not  facilitate  thereby  the  attainment  of  true  economic  democ- 
racy, merely  because  he  agrees  with  Consumerism  in  attacking 
capitalism.  Instead,  he  makes  our  progress  toward  economic 
liberty  more  difficult  and  slow,  more  costly  in  human  effort  and 
misery,  more  cataclysmic  in  its  nature,  and  more  dangerous  to 
that  national  and  international  stability  upon  which  the  welfare 
of  the  masses  rests  so  vitally.  He  is  daily  welding  more  firmly 
upon  the  workingman  his  existing  shackles,  of  insufficient  pur- 
chasing-power and  uncertainty  of  employment.  He  has  enforced 
upon  society  a  more  drastic  and  painful  convulsion  before  they 
can  be  cut  away. 

The  specific  reasons  why  Consumerism  is  so  diametrically 
opposed  to  each  and  all  of  these  basic  tenets  of  socialism  are 
stated  in  the  following  numbered  paragraphs.  As  these  num- 
bered tenets  of  Consumerism  are  arranged  in  parallel  with 
the  correspondingly  numbered  tenets  of  socialism  listed  above, 
they  can  be  read  intelligibly  only  by  a  seriatim  comparison, 
back  and  forth,  between  the  two  sets  of  paragraphs. 

( 1 )  Consumerism  does  not  recognize  production  as  completed 
by  the  wage-earning  factory-producer,  nor  at  the  factory-door, 
even  when  transportation  is  included  as  a  part  of  the  factory- 
system.  Consumerism  refuses  to  recognize  production  as  com- 
plete even  when  to  the  wage-paid  factory-operations,  in  their 
present  sense,  are  added  the  salaried  offices  of  superintendence 
and  the  function  of  transportation.  Consumerism  insists  that 
all  of  these  functions  may  have  been  performed  with  industry 
and  skill,  yet  the  result  will  be  sheer  rubbish,  worth  nothing 
for  community  life-support,  until  that  particular  Ultimate  Con- 
sumer who  can  and  will  absorb  it  usefully  has  been  identified. 

This  identification  is  the  most  difficult  and  costly  of  all  the, 
steps  of  production,  and  is  rapidly  growing  more  so.  It  is 
now  performed,  it  is  true,  in  a  most  cumbrous  and  costly  way; 
yet  even  to-day  it  determines,  nevertheless,  which  factory  shall 
run  and  which  one  stop,  which  one  pay  high  wages  and  which 
one  discharge  its  help,  which  commodity  be  rushed  on  overtime 
work  and  which  one  sold  off  at  a  loss.  The  socialist  far  under- 
estimates the  economic  importance  and  power  of  the  despised 
"bourgeoisie"  class  of  petty  trades-people. 

When  this  deficit  in  the  socialist  program  was  brought  to 


742  MODERN   ECONOMIC   TENDENCIES 

the  attention  of  Mr.  Hillquit  he  tossed  it  aside  with  a  con- 
temptuous :  "Well,  then,  the  producers  will  organize  that  also." 
But  how  would  that  be  possible?  He  quite  failed  to  see  that 
any  such  an  economic  system,  organized  from  that  end,  would 
be  absurd  and  inoperative.  Under  any  such  a  system,  when 
a  customer  entered  a  food-shop  and  asked  for  poultry  he  would 
be  told  that  only  beef  was  being  supplied  that  day;  while  in 
the  dry-goods,  hardware  and  other  stores  similarly  autocratic 
dictums  would  be  handed  out. 

While  these  illustrations  may  seem  to  have  been  made  mali- 
ciously absurd,  yet  they  are  not  so.  We  are  to-day  frequently 
told  that  we  cannot  have  sugar,  or  urban  transportation,  or  coal, 
etc.,  and  that  we  must  satisfy  ourselves  with  canned  tomatoes 
instead,  with  a  tyranny  which  would  be  maddening  to  the  point 
of  instant  revolt  if  the  people  only  knew  against  whom  to  revolt. 

In  the  present  case  no  one  has  maliciously  planned  such  a 
tyrannous  result.  It  has  occurred  simply  because  our  economic 
organization  has  been  almost  totally  neglected,  or  even  thrown 
deliberately  into  chaos,  by  its  being  erroneously  based  upon  the 
sacredness  of  ownership-in-industry,  quite  ignoring  the  sover- 
eignty of  the  Ultimate  Consumer.  But  any  organization  based 
upon  the  producer  as  supposed  sovereign  will  be  equally  errone- 
ous, and  will  result  in  a  tyranny  equally  absurd.  The  economic 
tyranny  under  which  we  now  suffer  is  due  to  its  control  by  those 
who,  if  anything  useful,  are  producers  rather  than  Consumers. 

Then  the  man  in  the  food-shop  will  force  the  buyer  to  take 
beef  instead  of  poultry  simply  because  he  has  beef  and  has 
no  poultry;  and  this  will  be  the  state  of  affairs  merely  because 
any  organization  built  upon  the  producer  necessarily  can  give 
but  a  deaf  and  clumsy  ear  to  the  demands  of  the  Ultimate  Con- 
sumer. When  it  has  mistakenly  made  more  of  this,  that  or  the 
other  commodity  than  is  wanted,  it  will  insist  that  it  has  done 
its  part,  and  that  the  stuff  must  be  consumed. 

In  contrast  with  this,  the  organization  of  all  industry  upon 
the  sovereignty  of  the  Ultimate  Consumer  will  automatically 
avoid  all  such  blunders,  inefficiencies  and  injustices,  because  its 
arrangement  will  be  primarily  for  the  prompt,  delicate  and 
accurate  transmission  to  the  producer  of  the  demands  of  the 
Ultimate  Consumer  himself.  This  difficult  task  (to-day  an  im- 
possible one)  once  having  been  accomplished,  it  is  relatively 
easy  matter  for  the  factories  to  produce  what  is  wanted. 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION        743 

Then  the  wage-earning  producer  will  enjoy  just  as  much 
sovereignty — far  more,  indeed — than  under  socialism,  because 
he  is  just  as  continually  an  Ultimate  Consumer  as  he  is  a  pro- 
ducer. Choice  between  socialism  and  consumerism  is  not  a 
question  of  relative  numbers,  nor  of  clashing  class-interests, 
at  all,  because  under  both  systems,  socialism  and  consumerism, 
all  will  be  producers  and  all  Ultimate  Consumers.  It  is  solely 
a  question  as  to  when  and  where  economic  sovereignty  is 
properly  to  be  asserted,  in  order  to  attain  that  most  elusive 
goal,  economic  democracy — whether  when  one  works  or  when 
one  buys. 

(2)  Consumerism  does  not  recognize  the  wage,  nor  the  com- 
petitive-wage system,  as  the  source  of  hardship.  This  is  not 
because  the  purchasing-power  of  the  present  wage  is  regarded 
as  sufficient,  but  because  its  deficiencies  are  due  neither  to  the 
fact  that  it  is  a  wage,  nor  to  the  fact  that  its  amount  is  de- 
termined competitively.  They  are  due  solely  to  the  fact  that, 
in  order  to  obtain  life-support,  it  has  to  be  expended  through 
a  mob  of  competing,  profit-seeking  sellers. 

For  the  rivalry  of  the  latter  is  commercial  competition,  which 
is  always  destructive  of  prosperity  for  all.  But  the  rivalry 
of  producers,  in  contrast,  is  emulation;  and  that  is  always 
enriching  to  all. 

The  avowed  program  of  the  socialists  to  make  all  active 
people  wage-earners,  in  effect  if  not  in  name,  should  be  re- 
garded by  them  as  proof  of  the  innocence  of  the  wage-system. 
They  should  be  able  to  see — or  the  intellectual  Intercollegiates 
certainly  should,  even  if  their  less  fortunately  educated  com- 
rades may  not  be  expected  to  discern — that,  if  they  are  starting 
out  to  make  wage-earning  the  universal  and  dominant  plan, 
they  cannot  begin  effectively  by  denouncing  that  system  as 
basically  wrong. 

Consumerism  also  starts  out  to  make  wage-earning  universal, 
although  it  distinctly  disclaims  any  idea  of  making  it  dominant. 
Therefore  it  starts  out  by  saying  that  the  competitive  wage- 
system  is  all  right,  not  only  in  principle  but  in  present  practice, 
so  far  as  it  is  permitted  natural  play  by  commercialism — which 
is  not  very  far — and  that  it  is  not  in  any  slightest  degree  re- 
sponsible for  the  existing  hardship  of  the  wage-earners.  For 
it  is  not  the  low  wage,  but  the  high  price,  which  is  impoverish- 


744  MODERN   ECONOMIC   TENDENCIES 

ing  and  exasperating  us  all  to-day;  and  the  competitive  wage- 
system  is  in  no  wise  responsible  for  high  prices. 

This  impoverishment  of  all  by  high  prices  is  then  explained 
by  consumerism  as  being  due  not  to  any  particular  form  or 
system  of  payment,  nor  to  the  relation  of  wage-earner  to  wage- 
payer,  but  to  the  character  of  the  thing  done  for  the  wage  or 
other  income.  For  many  wage-earners  are  now  actively  en- 
gaged in,  and  are  economically  if  not  morally  or  consciously 
responsible  for,  the  impoverishment  of  their  own  class — of  them- 
selves, indeed. 

For  every  man  who  does  a  useless  or  antagonistic  thing,  or 
helps  anyone  else  do  such,  is  impoverishing  himself  and  every 
other  person.  The  fact  that  his  income  happens  to  be  in  the 
form  of  a  wage,  even  an  insufficient  wage,  has  no  influence 
over  the  effects  of  his  acts.  Instances  of  such  are  the  scrub- 
women in  office-buildings,  and  nearly  all  stenographers,  book- 
keepers, journeymen-printers,  etc.,  wherever  they  are  occupied 
in  helping  commercialists  make  money. 

All  this  being  true,  it  must  be  evident  that  no  degree  of 
acceptance  of  socialistic  doctrine  by  those  now  not  subscribing 
to  it — even  to  the  point  of  all  employers  becoming  wage-earners 
beside  their  workmen — could  remedy  the  sufferings  of  the  poor. 
So  long  as  every  sale  is  free  to  be  fought  over  by  a  mob  of 
competing  salesmen,  all  wages  will  still  be  paid  in  twenty-cent 
dollars,  as  now,  and  those  dollars  will  be  rapidly  becoming 
eighteen-cent  dollars,  as  now.3 


3  The  present  situation  in  Russia,  under  bolshevist  or  soviet  rule,  may 
throw  some  light  upon  this  aspect  of  the  problem.  The  New  York 
Times  for  August  16,  1918,  translates  from  the  EussJcoye  Slovo  an 
article  by  Mr.  Alexander  Boublikoff,  a  "prominent  Eussian  economist 
and  former  commissionaire  of  the  Duma,"  in  which  appears  the  fol- 
lowing: 

"Mr.  Boublikoff  declares  that  the  actual  demoralization  of  Russia's 
economic  strength  began  with  the  demand  that  factory-owners  give 
up  their  dividends  to  the  workingmen,  who  were  suffering  because 
of  the  high  cost  of  living.  But  inasmuch  as  it  was  found  that  the 
whole  sum  of  the  dividends,  when  divided  among  the  masses,  would 
provide  only  a  scant  sum  for  each  head  of  the  population,  attempts 
began  to  be  made  to  expropriate  that  part  of  the  business-income 
which  did  not  constitute  the  dividends,  but  laid  aside  for  all  kinds 
of  reserve-funds  intended  for  the  renewal  of  machinery,  for  building-up 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION        745 

(3)  No  personal  distinction  whatever  between  economic  op- 
pressor and  oppressed  is  possible.    As  explained  above,  the  line 
must  be  drawn,  instead,  between  productive  or  enriching,  and 
destructive  or  impoverishing,  activities;  and  each  individual  in 
the  land  embodies  some  of  both  sorts. 

Because  there  exist  no  statistical  data  bearing  directly  upon 
a  classification  of  activities,  we  were  forced,  in  our  analysis 
supporting  the  doctrine  of  consumerism,  to  assort  the  data  con- 
cerning occupations  in  terms  of  the  numbers  of  individuals 
pursuing  them.  But  at  every  point  it  was  emphasized  that  this 
method  was  too  personal  and  drastic  for  final  truth,  since  every 
individual's  occupation  comprised  some  of  each  sort  of  activity. 
Also,  that  those  who  were  guilty  of  destructive  activities  were, 
in  the  main,  unconscious  of  their  guilt. 

(4)  The   problem   is   one   far   deeper   than   that  of   saving 

purposes,  and  under  the  existing  circumstances  for  the  demobilization 
of  industry  that  would  have  to  come  after  the  war." 

American  socialists  may  refuse  to  accept  this  statement  because  of 
its  source.  They  need  not  do  so.  Let  them  merely  apply  this  idea  to 
American  statistics.  They  will  find  the  aggregate  of  current  dividends, 
when  distributed,  quite  inadequate  to  relieve  the  workingman  from 
hardship  under  prevailing  prices.  They  will  then  realize  that  the  dis- 
tribution of  dividends  did  not,  and  could  not,  affect  by  a  penny 
(except  momentarily)  that  continual  elevation  of  prices  which  is  the 
workingman 's  real  hardship. 

The  Intercollegiates,  who  have  never  directed  their  brains  toward  any 
economic  analysis  so  onerous  as  this,  should  be  able  to  teach  their  less 
fortunate  comrades  that,  just  because  dividends  happen  to  be  wrong, 
that  is  no  proof  that  transferring  them  cures  that  wrong.  Not  until  they 
naturally  cease  to  exist  will  the  workingman  be  freed. 

The  secret  of  whatever  success  soviet  Eussia  may  have  attained  lies 
in  the  fact  that  in  Eussia  agriculture  ii  of  far  greater  relative  impor- 
tance than  technical  industry;  and  the  Soviets  have  nationalized  the  land. 
Land  will  endure  this  process,  because  it  is  a  tangible,  indestructible 
thing.  It  will  endure  transfer. 

But  industrial  credit,  in  contrast,  is  not  so.  The  instant  one  attempts 
its  transfer  by  force,  it  evaporates  into  nothing.  Hence  Eussia 's  in- 
dustry is  paralyzed  and  its  cities  starve  while  its  agriculturist  peasants, 
relatively  speaking,  thrive. 

Because  Eussia,  in  spite  of  its  agriculture,  is  forced  to  live  in  a 
modern  world  relying  upon  industry  and  interchange,  its  gain  due  to 
its  nationalization  of  the  land  has  fallen  far  short  of  solving  the  prob- 
lem of  life  for  its  dwellers  in  the  cities.  More  time — five  years,  at  least 
— must  elapse  before  any  conclusion  may  be  drawn  as  to  success  or 
failure. 


746  MODERN   ECONOMIC   TENDENCIES 

merely  the  wage-earners.  It  is  to  abolish  all  poverty.  To  do 
that  one  must  attack  the  thing  which  enforces  poverty  upon 
many  who  are  not  wage-earners,  which  is  set  in  motion  by 
many  who  are  not  wage-payers,  namely,  commercial  competition. 

(5)  Responsibility  for  the  wrong  rests  upon  no  one  economic 
class  rather  than  another.     All  who   spend  money  have  had 
their  part  in  its  development.    Those  who  now  profit  by  it  the 
most  are  as  helpless,  as  a  class,  to  abolish  it  as  are  the  wage- 
earners  or  the  petty  bourgeoisie.     As  private  citizen  the  man 
of  wealth  and  possible  leisure  is  under  heavy  responsibility  for 
doing  far  more  toward  cogent  debate  of  economic  problems, 
from  the  standpoint  of  the  Ultimate  Consumer,  than  he  now 
manifests.     But  as  employers  each  of  this  class  is  as  helpless 
as  are  his  employees. 

(6)  Contrary   to  the  many   shades  of  belief  of  the  whole 
socialist   and   trades-union   movement,    the   capitalist-employer 
class  possesses  no  economic  power  whatever  to  remove  the  burden 
from  the  poor.     The  employer  is  neither  a  free  nor  a  com- 
petent remedial  agent,  even  in  behalf  of  his  own  employees; 
for  he  has  no  slightest  control  over  the  prices  which  they  are 
forced  to  pay  in  the  outside  world,  and  this  is  where  their  hard- 
ship lies. 

He  can  raise  wages  slightly,  if  he  will,  it  is  true;  but  he 
cannot  make  them  buy  more.  Indeed,  he  cannot  help  the 
higher  wages  buying  less.  Whether  wages  be  raised  voluntarily, 
or  by  force  of  law,  or  in  surrender  to  strike  or  sabotage,  the 
result  to  the  working-classes  is  inevitably  the  same — THEY  BUY 

LESS  AS  THEY  RISE. 

(7  and  8)  The  remedy  for  economic  ills,  however  it  may 
be  accomplished,  lies  solely  in  bringing  prices  down,  rather  than 
in  forcing  wages  up;  for,  as  prices  are  forced  down  by  the 
only  means  competent  to  do  that  job — the  abolition  of  all  own- 
ership-in-industry — wages,  in  spite  of  the  fact  that  they  will 
fall  somewhat,  will  buy  more;  whereas  when  wages  are  forced 
up,  with  no  attention  paid  to  prices,  they  inevitably  buy  less. 

The  raising  of  wages  certainly  cannot  help  matters,  for 
wages  have  been  rising  recently  as  never  before  in  the  last 
century;  yet  the  result  is  that  the  economic  problem  has  been 
growing  upon  us  with  an  acceleration  and  an  intensity  never 
before  experienced.  As  wages  rise  the  employer-class,  far  from 
appearing  as  the  losing  source  of  these  greater  riches  for  the 


THE   REMEDY — CONSUMERISM   AND    CONSUMERATION       747 

wage-earners,  has  gained  in  wealth  as  never  before.  When  will 
labor  learn  the  lesson  standing  out  from  every  knob  of  the 
economic  situation — that  wages  are  not  paid  by  the  employers, 
but  by  other  wage-earners! 

(10)  No  conceivable  pressure  towards  the  elevation  of  the 
wage,  whether  by  strikes  or  by  socialistic  legislation,  whether 
apparently  successful  or  not,  can  ever  possibly  reduce  by  one 
penny  the  wealth  of  the  employing-class  as  a  whole,  through  a 
transfer  of  their  wealth  to  the  working-classes.  Neither  higher 
wages,  nor  higher  income-taxes,  nor  profit-sharing,  nor  sabotage, 
nor  a  general  strike,  nor  any  other  scheme  yet  proposed  for 
tapping  the  dropsical  tills  of  the  employers,  while  omitting  to 
install  the  sovereignty  of  the  Ultimate  Consumer  over  a  unitary 
factory-system,  has  ever  succeeded  in  the  past,  or  will  ever 
succeed  in  the  future,  in  making  capitalism  poorer  and  labor 
richer.  Every  such  effort  has  always  made  either  the  employer 
richer,  or  labor  poorer,  or  both. 

The  policy,  of  attacking  entrenched  wealth  or  "vested  in- 
terests" by  direct  frontal  assault,  rather  than  by  besieging  its 
source  of  supplies  at  the  shop-counter,  has  always  been  for  the 
people  a  game  of  Cfheads,  I  win;  tails,  you  lose."  However  the 
stronghold  of  commercialism  may  have  been  penetrated  mo- 
mentarily, the  effort  to  abstract  anything  has  always  proved 
futile.  The  suction  inside  is  too  powerful.  At  every  hole 
punctured  the  borer  is  always  sucked  into  the  hole — body,  purse, 
vote  and  soul  together! 

Automatic  Involuntariness  Again. — Whether  it  be  the  rais- 
ing of  a  factory-wage,  prying  up  prices  faster  than  wages; 
or  a  generous  tip  to  a  waiter,  dropping  his  time-wages  as 
his  average  tip  increases;  or  a  customer's  refusal  of  change 
from  a  sidewalk  newswoman,  automatically  swelling  her  cost 
of  living  as  fast  as  the  sellers  find  that  she  has  more  money 
to  spend;  or  a  check  mailed  to  a  refuge  for  wayward  girls, 
removing  from  the  street  where  she  made  her  living  one  com- 
petitor with  the  other  girls,  and  thus  admitting  to  profitable 
employment  one  more  unfortunate,  industrially  unemployed — 
whichever  of  these  or  many  another  similar  instance  matters 
not.  The  economic  result  is  the  same.  Wherever  the  human 
heart,  whether  driven  by  generosity  or  by  patriotism,  attempts 
to  overrule  the  stern  law  of  economic  equilibrium — the  equi- 
librium of  a  rigid  system  established  neither  by  society's  malice 


748  MODERN   ECONOMIC   TENDENCIES 

nor  even  by  its  personal  greed,  but  enforced  merely  by  society's 
stupid  reliance  upon  the  archaic  cottage-system  of  ownership- 
in-industry  where  no  ownership  is  needed — there  failure  is  in- 
evitable. 

When  we  begin  in  the  right  way,  by  observance  of  these 
unyielding  laws,  our  success  will  be  as  remarkable  as  it  has 
been  in  mechanics,  where  we  are  most  careful  to  proceed  with 
all  humility  before  natural  law.  But  by  bull  strength  and 
stupid  disregard  of  cosmic  principles  of  equilibrium — which 
apply  in  sociology  just  as  cogently  as  they  do  in  mechanics, 
chemistry  or  electricity — we  shall  accomplish  nothing. 

Under  the  commercial  system  wealth  grows  irresistibly,  and 
poverty  likewise.  A  high  tariff  has  caused  the  rich  to  grow 
rich  very  rapidly;  but  a  reformed  tariff,  instead  of  reversing 
that  process,  has  only  seemed  to  accelerate  it.  Consolidations 
in  business  have  apparently  aided  the  expansion  of  wealth;  but 
what  enforcements  of  the  anti-trust  law  have  yet  been  accom- 
plished have  led  only  to  still  greater  dividends,  after  the  con- 
solidation had  been  dissolved.  In  wartimes  the  rich  make 
huge  fortunes  quickly ;  in  peace  they  make  still  larger  ones  almost 
as  quickly.  By  day  and  by  night,  on  week-days  and  on  Sun- 
day, in  summer  and  in  winter,  under  Republican,  under  Demo- 
cratic and  under  Socialist  administrations,  wealth  continues  to 
accumulate  irresistibly  in  the  hands  of  the  wealthy,  or  else  the 
poor  grow  more  uncertain  of  their  tenure  of  life.  The  wealthy 
themselves  cannot  prevent  it! 

In  this  huge  and  very  human  crisis  the  heart  has  indeed  a 
most  important  function  to  perform ;  but  it  is  not,  like  shrewd 
King  Canute  commanding  the  rising  tide  to  stop,  to  try  to 
overcome  the  huge  and  inevitable  results  of  a  wrong  economic 
world-system  by  means  of  individual,  pecuniary  generosity.  In- 
stead, the  duty  of  the  generous  nature  is  at  least  dual  in  form. 

First,  it  must  face  the  rising  crisis  with  courage  and  faith 
in  man  and  God,  rather  than  with  bitter,  foreboding  indictment 
of  others;  for  it  is  a  wrong  system  to  be  indicted,  rather  than 
man  himself,  and  the  system  is  here  because  of  our  common  • 
stupidity,  rather  than  our  malice,  greed  or  other  immoral  trait. 
We  must  preserve  patience,  faith  and  love  toward  those  who, 
born  differently,  reared  differently  and  situated  differently  in 
the  economic  structure  from  ourselves,  inevitably  believe  differ- 
ently and  act  differently  from  what  we  believe  to  be  right. 


THE  REMEDY — CONSUMERISM  AND   CONSUMERATION       749 

For  we,  too,  may  not  be  quite  so  right  as  we  think.  In  a  situa- 
tion so  intricate  that  the  most  intelligent  of  men  cannot  agree 
as  to  what  is  the  trouble,  or  what  the  remedy,  the  expression 
of  dogmatic,  positive,  sweeping  statements,  particularly  when 
they  are  condemnatory  of  millions  of  men  quite  unknown  to  the 
speaker,  is  obviously  childish,  if  not  worse. 

Secondly,  we  must  preserve  faith  that  every  storm  clears  the 
air  and  waters  the  crops,  as  well  as  destroys  somewhat.  In  the 
gathering  crisis  the  gains  to  us  all  in  sight  are  greater  than 
those  involved  in  any  previous  cataclysm  of  history. 

But  above  all,  we  must  remember  that  this  basic  law  of 
present  public  helplessness  over  social  ills  is  due  merely  to  the 
fact  that  we  possess  to-day  no  competent  science  of  sociology. 
Until  we  acquire  one,  our  blind  and  blundering  social  progress 
must  develop  one  painful  collision  after  another. 

(11,  12  and  13)  From  all  of  the  above  considerations  it  must 
have  become  plain  that  the  whole  class-struggle  policy,  trusting 
to  victory  in  an  endless  battle  which  concerns  no  vital  principle, 
is  a  mistake.  It  accomplishes  not  even  temporary  nor  local 
good  for  the  working-classes,  but  always  permanent  harm. 

Any  attack,  in  order  to  succeed,  must  not  be  made  in  the 
name  of  any  one  class,  whether  wage-earner,  capitalist,  petty 
bourgeoisie  or  underpaid  intellectual.  Only  in  the  name  of  all 
economic  citizens  can  success  be  attained;  and  the  one  economic 
function  common  to  all  classes  is  Ultimate  Consumption. 
Attack  must  be  made  in  the  name  of  all,  by  the  Ultimate 
Consumers  organized  in  mass,  upon  plutocracy's  sole  base  of 
supplies — the  shop-counter. 

(14)  There  is  no  ground  for  reliance  upon  political  action 
to  help  the  economic  situation.  While  the  socialist  successes 
at  the  polls  have  been  too  limited,  as  yet,  for  reliable  conclusions 
to  be  drawn  (from  the  fact  that  they  have  availed  nothing  to 
remedy  the  economic  situation,  nor  even  to  prevent  it  from 
getting  worse)  yet  there  are  broader  grounds  from  which  it 
may  be  predicted  that  no  conceivable  socialist  success  in  the 
political  field  can  affect  even  slightly  our  economic  hardships. 
These  grounds  lie  in  the  fact  that  nowhere  in  our  political 
government — nor  in  that  of  any  other  country,  for  that  matter 
— has  yet  been  organized  the  only  power  competent  to  control 
the  forces  now  creating  those  hardships — the  power  of  the 


750  MODERN   ECONOMIC  TENDENCIES 

Ultimate  Consumer.    For  this  is  a  very  different  thing  indeed 
from  the  power  of  the  Voter. 

These  oppressive  forces,  already  fully  outlined  in  detail  in 
preceding  chapters,  consist  in,  first,  the  steady  drift  of  popula- 
tion out  of  productive  and  into  negotiative  occupations;  and 
secondly,  the  steady,  but  accelerating,  accumulation  of  interest- 
bearing  securities.  Neither  of  these  processes  can  be  touched 
effectively  by  legislation.  The  right  of  the  Voter  to  control 
either  of  these  has  never  yet  been  voiced.  Still  less  is  it  recog- 
nized in  our  Constitution. 

The  right  of  each  citizen  to  choose  freely  his  occupation  is 
one  of  the  most  fundamental  features  of  our  personal  liberties, 
traditionally  prized  by  all  Americans  for  generations.  It  will 
require  no  small  cataclysm  before  it  will  be  surrendered  at  all. 
It  will  never  be  surrendered  (except  temporarily,  under  duress) 
to  the  authority  which  the  socialists  wish  to  enthrone — the  pro- 
ducers organized  as  a  class. 

The  issue  of  interest-bearing  securities  is  a  process  presum- 
ably far  more  amenable  to  legislative  control  than  is  the  choice 
of  an  occupation.  Frequently  measures  have  been  proposed 
for  accomplishing  this  control.  But  none  of  them  have  worked, 
and  none  of  them  can  work,  because  of  a  resistant  phenomenon 
far  more  powerful  even  than  a  racial  prejudice.  This  is  the 
fact  that  the  negotiative  and  circulatory  valuation  of  every 
interest-bearing  security  is  based  wholly  upon  the  prospect  of 
continued  returns  of  interest  and  dividends  in  the  future,  in 
ever-increasing  amounts. 

It  is  the  constantly  wavering  estimate  of  this  probability,  or 
expectation,  regarding  one  issue  or  another,  which  requires  hourly 
announcement  from  the  exchanges,  through  an  intricacy  of 
tickers,  financial  columns,  Wall-street  editions,  etc.  That  which 
wavers  continually  so  delicately  certainly  cannot  be  relied  upon 
to  manifest  solid  stability  under  stress.  Its  complete  collapse 
is  one  of  the  most  probable  of  phenomena. 

This  being  so,  the  conclusion  is  irresistible  that  whenever 
the  people  shall  have  made  up  their  minds  to  use  their  political 
power  to  end  our  economic  hardships,  by  whatever  attack  upon 
profits  and  dividends  may  be  imagined,  their  success  at  the 
polls,  after  a  preliminary  national  debate,  can  have  but  one 
effect.  It  will  precipitate  all  security-valuations  to  a  small  frac- 
tion of  normal,  in  a  panic  such  as  has  never  before  been  known. 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       751 

This  prediction  is  no  mere  estimate  or  guess.  The  inexorable 
law  enacted  by  the  commercial  world  itself — that  all  valuations 
depend  solely  upon  prospects  as  to  future  profits  or  dividends — 
makes  it  indubitable  that,  the  instant  the  people  have  given 
formal  notice  of  a  disposition  to  attack  profits  and  dividends, 
that  instant  all  security-valuations  must  collapse  permanently. 

To  anyone  who  has  digested  the  chapter  upon  Unemployment, 
above,  this  collapse  means  the  immediate  shutting  down  of 
factories  and  railroads  in  major  fashion,  the  trooping  of  multi- 
millions  of  unemployed  into  the  streets,  the  cessation  of  all  but 
insignificant  supplies  of  food  and  fuel,  and  hence  the  inaugura- 
tion of  revolution.  Thus,  even  if  we  possessed  to-day  a  public 
opinion  requisite  for  adequate  economic  reform  (which  is  very 
far  from  being  the  case)  it  could  not  now  get  itself  enacted 
into  any  law  competent  to  cure,  without  thereby  exploding  the 
whole  inflated  and  highly  inflammable  balloon  of  commercial 
credit,  upon  which  we  rely  for  our  daily  life-support! 

It  is  already  too  late  to  avoid  revolution.  Our  heavy  re- 
sponsibility lies  in  the  direction  of  mitigating,  by  prevision, 
its  horrors. 

This  is  the  one  fact  of  most  cogent  importance  in  any 
estimate  of  our  social  future.  Yet  it  is  the  one  fact  totally 
ignored  in  the  teachings  of  the  professional  sociologists,  and 
in  the  philosophies  of  either  the  old-party,  the  progressive  or 
even  the  socialist  programs  for  reform. 

We  have  already  accumulated  this  vast  magazine  of  explosives, 
and  have  reared  our  entire  political  and  economic  structure 
thereon.  As  yet  we  see  no  way  even  to  check  its  irresistible 
and  accelerating  increase.  Its  disposal  is  the  one  most  vital 
problem  of  modern  sociology.  Yet  these  pages  are  the  only 
non-socialistic  ones  giving  warning  of  the  danger  involved  in 
its  existence;  and  not  even  the  socialists  comprehend  at  all  the 
impossibility  of  its  gradual,  peaceful  removal. 

History's  Repetitions. — Is  this  language  to  be  regarded  as 
unduly  pessimistic?  Look  at  past  American  history.  What 
was  it  which  precipitated  secession  in  1860,  making  civil  war 
inevitable  ?  Merely  the  election  of  Lincoln  ! 

Months  before  he  had  entered  the  White  House,  to  manifest 
his  policy  by  any  administrative  act  whatever,  South  Carolina 
seceded,  merely  because  he  had  been  elected.  This  positive  ex- 
pression of  public  opinion  was  too  much  for  our  social  insta- 


752  MODERN   ECONOMIC   TENDENCIES 

bility,  already  tottering  under  a  burden  no  heavier  than  that 
of  a  widespread  human  injustice  to  an  admittedly  inferior  race. 
Was  the  situation  so  much  worse  than  now,  when  it  is  white 
"intellectuals"  who  are  oppressed? 

Yet  this  occurred  without  Lincoln's  being  an  abolitionist. 
He  was  merely  a  progressive.  In  spite  of  popular  superstition 
to  the  contrary,  it  is  distinctly  true  that  Lincoln  was  never  an 
abolitionist.  In  his  campaign-utterances  before  election  and  in 
his  official  proclamations  from  the  White  House  after  his  elec- 
tion, he  held  himself  rigidly  to  the  view  that  he  had  no  authority 
to  touch  slavery  in  the  Southern  States.  His  statements  were 
most  specific.  His  utmost  menace  against  slavery  was  that 
he  proposed  to  restrict  its  growth  into  the  territories  governed 
by  Congress  rather  than  by  state-constitutions. 

The  parallel  with  our  present  crisis  is  exact.  There  can  be 
no  candidate,  however  reserved,  nor  any  platform,  however 
gentle,  upheld  at  a  national  election,  which  reveals  a  popular 
determination  even  to  restrict  the  growth  of  commercialism, 
that  commercialism  does  not  immediately  collapse,  leaving  us 
floundering  in  an  anarchy  of  economic  interregnum.  This  in- 
terregnum must  continue  until  public  faith  shall  have  been 
resurrected  in  an  entirely  novel  system  of  industrial  credit, 
namely,  non-interest-bearing,  non-negotiable  factory-system 
requisitions,  issued  under  an  authority  not  now  existing  any- 
where in  the  world — the  organized  economic  sovereignty  of 
hundreds  of  millions  of  Ultimate  Consumers. 

But  that  step  is  as  far  in  advance  of  anything  now  embodied 
in  our  political  organization  as  a  republican  form  of  government 
was  in  advance  of  the  monarchies  of  1776.  Anyone  who  thinks 
that  such  a  gigantic  stride  forward  in  the  evolution  of  civiliza- 
tion as  that,  is  going  to  be  voted  into  existence  peaceably,  over- 
night, as  we  acquired  our  extension  of  the  suffrage  to  women 
and  prohibited  alcoholic  drink,  is  welcome  to  waste  his  time 
in  political  efforts  at  economic  reform.  Such  a  person  has  lost 
all  sense  of  relative  magnitudes. 

(15)  All  direct  attack  upon  the  problem  of  unemployment, 
whether  by  means  of  forced  public  works,  employment-bureaus 
or  what-not,  always  has  failed  and  always  will  fail.  This  is 
because  no  such  measure  touches  even  remotely  the  true  cause 
of  unemployment,  namely,  the  current  and  growing  volume  of 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       753 

commercialism,   with  its  resultant  deficit  in   purchasing  and 
hiring  power. 

(16)  The  form  of  society  destined  to  emerge  ultimately  from 
all  this  intricate  confusion  will  certainly  be  one,  whatever  may 
be  its  features  in  detail,  based  in  some  way  upon  the  natural 
sovereignty  of  the  Ultimate  Consumer,  and  not  recognizing  the 
producer  in  any  authoritative  capacity.  As  a  Consumer  the 
producer  will  then  enjoy  rights,  and  as  a  human  being  he  will 
enjoy  comforts,  such  as  now  cannot  be  imagined.  But  this  will 
be  because,  in  order  to  wield  his  natural  sovereignty  as  a  Con- 
sumer, he  has  yielded  his  unnatural  sovereignty  as  a  producer. 

During  the  process  of  attainment  of  this  ultimate  society, 
as  in  its  permanent  operation,  everyone  who  appears  with  a 
dollar  to  spend  must  have  just  as  much  to  say  as  to  its  destina- 
tion as  any  other  Ultimate  Consumer.  At  the  shop-counter 
of  the  truly  reformed  state  no  questions  will  be  asked  (as  the 
socialists  would  decree)  as  to  whence  cometh  any  dollar,  but 
only  whither  it  goeth.  That  point  once  cared  for  to  suit  the 
Consumer,  there  need  be  no  worry  as  to  any  unearned  money 
being  brought  in  for  spending.  It  will  not  exist. 

As  for  the  vast  fortunes  of  unearned  money  already  ac- 
cumulated, there  need  be  no  worry,  as  with  the  socialists,  as 
to  how  to  transfer  it  to  the  proletariat.  It  will  never  survive 
the  first  effort  at  its  transplanting.  The  collapse  of  all  com- 
mercial securities,  rental  valuations,  etc.,  with  the  consequent 
dissolution  of  our  vast  fortunes,  will  be  the  first,  not  the  last, 
act  of  the  automatic  social  convulsion  now  inevitable. 

If  history  repeats  itself,  this  process  will  not  take  long.  It 
will  be  accomplished  to  a  major  amount  within  the  first  week 
or  so  of  collapse.  But  four  or  five  years  may  be  consumed  in 
the  gradual  evaporation  of  the  remainder. 

If  the  universities  once  allow  this  crisis  to  come  to  a  head 
without  adequate  warning  to  the  people,  these  fortunes  will 
suddenly  be  found  to  possess  the  same  negotiative  valuation 
that  the  slave-property  of  1850  possessed  after  Fort  Sumter 
had  been  fired  upon,  through  the  slavery-crisis  having  been 
neglected  until  war  had  become  inevitable.  Standard  Oil  stock 
or  U.  S.  Steel  bonds  have  manifested  many  fluctuations,  up 
and  down,  heretofore.  There  is  nothing  in  the  laws  of  the 
universe  to  prevent  their  becoming  on  a  par  with  Confederate 


754  MODERN   ECONOMIC   TENDENCIES 

money  to-day — preserved  occasionally  in  show-cases  as  curiosi- 
ties having  no  other  valuation. 

It  was  so  with  the  special  privileges  of  the  French  aristocracy 
of  1785,  which  were  then  enormously  valuable  as  mere  incomes. 
Holding  on  to  these  unearned  special  privileges  a  little  too  long, 
as  the  slave-owners  held  a  little  too  long  to  slavery,  brought 
their  valuations  suddenly  to  zero;  and,  in  addition,  put  most 
of  the  owners  thereof  where  they  no  longer  needed  consola- 
tion for  the  collapse  of  their  privileges. 

It  has  been  the  same,  during  the  last  decade,  with  the  com- 
mercial value  of  German  royal  prerogatives,  which  five  years 
ago  were  immensely  lucrative.  This  possibility  of  history's 
repeating  itself  is  a  point  which  our  businessmen  quite  fail  to 
appreciate. 

Nor  must  the  author  be  so  deeply  misunderstood  as  basing 
any  such  a  prediction  as  the  above  upon  any  policy  of  deliberate 
confiscation.  He  has  already  stated  plainly  that  he  considers 
any  such  a  policy  unwise.  More  than  that,  it  is  quite  unnecessary. 
All  that  is  needed,  in  order  to  make  inevitable  a  complete 
collapse  of  all  negotiative  valuations  of  securities  in  the  near 
future,  is  a  continuation  of  the  present  commercial  policy  of 
reckless  inflation  of  prices — a  policy  which  has  prevailed  now 
for  a  quarter  of  a  century  and  which  is  still  being  accelerated, 
up  to  the  latest  advices — a  policy  just  as  foolishly  blind  to  the 
natural  limits  of  a  people's  endurance  as  is  the  continual 
shortening  of  the  working-day  by  the  labor-organizations.  Yet, 
if  this  book's  analysis  be  at  all  sound,  this  is  a  policy  not  under 
control  even  by  the  commercialists. 

If  this  last  statement  be  unsound,  the  commercialists  know 
well  what  alone  will  constitute  its  disproof,  in  the  only  manner 
convincing  to  the  people.  I  refer  to  the  lowering  of  all  prices, 
not  by  some  minor  fraction,  but  by  the  eighty-odd  per  cent 
necessary  to  bring  them  down  to  the  natural,  factory-system 
level. 

(17  and  18).  The  most  important  items  of  credit  and  of 
costs  of  distribution,  which  are  quite  omitted  from  the  socialist 
program,  have  already  been  treated  from  the  standpoint  of 
Consumerism  with  ample  fullness,  in  other  portions  of  this  book. 

True  Economic  Democracy. — For  all  of  these  detailed  rea- 
sons, as  well  as  for  the  higher,  abstract  one  of  purity  of 
economic  democracy,  it  may  be  laid  down  as  a  fundamental 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       755 

principle  that,  in  the  organization  of  any  effective  economic 
reform  all  economic  classes  must  be  recognized,  welcomed  and 
included  from  the  start.  Between  Ultimate  Consumers  no  dis- 
tinction can  be  tolerated.  The  permanent  success  of  any  revolu- 
tionary movement  will  depend  basically  upon  every  person's 
being  both  invited  and  forced  to  come  in;  and  only  the 
authority  of  all  can  enforce  that. 

Class-Cousciousness. — Every  class-movement  of  past  history, 
whether  of  an  upper  class  or  a -lower  one,  whether  in  the  right 
or  in  the  wrong,  has  been  a  failure,  ultimately  if  not  immedi- 
ately. Nothing  nationally  constructive  can  ever  come  of  any 
class-movement  whatever,  formed  on  lines  however  drawn  across 
the  social  structure.  It  can  come  only  through  a  self-purifica- 
tion of  society  acting  as  a  unit.  This  is  the  lesson  which 
Lincoln  had  such  trouble  in  teaching  the  North,  as  it  slowly 
conquered  the  South. 

Without  doubt  these  tenets  of  orthodox  socialism  which  have 
just  been  condemned,  and  their  advocates,  will  play  a  promi- 
nent part  in  the  impending  crisis;  but  it  will  be  a  purely  de- 
structive part.  Without  doubt  its  narrow-minded  leaders  will 
rise  to  great  and  tyrannical,  if  temporary,  power.  But  their 
power  will  be  as  short-lived  and  suicidal  as  that  of  the  Dantons 
and  Robespierres  of  the  French  Revolution.  They  will  drag 
each  other  down  into  the  mire  of  error  and  outrage,  forced  from 
each  mad  act  to  a  still  madder  one  by  the  falsity  of  the  economic 
premises  from  which  they  started,  and  by  the  consequent  futility 
of  their  measures  for  reform;  until  they  finally  execute  each 
other  as  the  only  visible  obstacles  to  a  success  which  had  been 
impossible  from  the  start. 

Their  final  overthrow  into  oblivion  will  be  by  the  hands  of 
those  whom  they  gayly  hailed  as  "Comrades !"  at  the  start. 
It  was  thus  with  Camille  Desmoulins,  for  instance,  who  in 
1789  jumped  upon  a  table  in  the  garden  of  the  Tuilleries  and 
originated  the  green  cockade  of  the  Revolution  by  sticking  a 
sprig  of  foliage  in  his  hat.  For  four  years  later  he  was  dragged 
to  the  guillotine  by  his  fellow  "citizens,"  collapsed  into  a  pitiable 
wreck  by  his  agony  of  bodily  fear. 

And  yet,  at  bottom,  these  leaders  of  socialistic  thought  will 
have  been  guilty  of  no  more  heinous  sin — unpardonable  in 
nature's  eyes — of  making  a  mistake  at  the  start  in  their  political 
economy.  It  may  be  a  "gloomy  science,"  but  it  pays  to  study  it. 


756  MODERN   ECONOMIC   TENDENCIES 

The  more  intelligent  and  Americanized  among  the  socialists 
have  already  revolted  in  horror  from  the  political  doctrines  of 
orthodox  socialism;  yet  they  seem  unable  to  perceive  that  these 
broader  political  errors  arise  inevitably  from  a  wrong  economic 
doctrine.  Soon  they  must  revolt  again  and  again,  in  even 
greater  horror,  as  the  true  sequel  to  these  false  premises  gradu- 
ally becomes  revealed. 

For  when  once  the  procession  of  events  shall  have  torn  ruth- 
lessly from  the  high-wage,  pry-it-out-of-the-employer,  class- 
struggle  tenets  their  past  disguise  amidst  the  intricacies  of 
peace,  or  their  present  submergence  beneath  the  flood  of  war, 
they  will  stand  suddenly  revealed  in  a  naked  truth  far  more 
horrible  than  is  now  suspected  by  their  advocates — one-half  of 
society  tearing  at  the  throats  of  the  other  half,  with  dynamite 
and  arson,  machine-gun  and  mine,  pillage,  murder  and  rapine 
— with  Wall  street  and  Fifth  avenue  in  ruins,  with  factories  and 
country-estates  in  flames,  with  railroads  wrecked  and  com- 
munication paralyzed,  with  famine  breeding  pestilence  in  a 
population  even  worse  congested  than  now,  and  with  the  pos- 
session of  wealth  as  fatal  a  crime  as  was  the  ownership  of  a 
title  to  nobility  in  France  in  1793  !* 

Yet  here,  as  in  the  French  Revolution,  each  side — or  each 
of  the  twenty  different  factions — will  then  work  imbued  with 
the  belief  that  it  is  standing  merely  to  protect  its  God-given 
rights.  In  revolutions  as  in  wars,  there  has  never  been  an 
admittedly  deliberate  offensive;  each  act  is  always  undertaken 
as  one  of  defense.  From  every  salient  of  the  French  Revolu- 
tion— from  aristocrats,  from  the  Third  Estate,  from  Girondist 
"intellectuals"  and  from  many  different  layers  of  the  people, 
fighting  in  rags  amidst  cold  and  hunger — radiated  an  unques- 
tionable light  of  exalted  spiritual  devotion  to  abstract,  if  mis- 
taken, ideals. 

To-day  both  commercialist  and  socialist  groups  have  each  its 
sincere  standard  of  ethics,  founded  upon  what  each  group  be- 
lieves to  be  the  facts.  Therefore  this  book  has  been  launched 
in  the  hope  of  arousing  interest  in  a  scientific,  impartial  de- 
termination of  these  facts,  to  serve  as  a  common  ground  upon 
which  both  contending  parties  may  meet,  each  to  perceive 
wherein  it  is  right  and  how  far  it  is  wrong.  But  the  first  need 

*The  above  was  written  at  least  a  year  before  the  word  bolshevism 
became  known  in  America. 


THE    REMEDY CONSUMERISM    AND    CONSUMERATION        757 

for  this  patriotic  task  is  a  wider  prevalence  of  intellectual 
courage — the  factor  which  seems  at  present  to  have  ebbed  wholly 
away  into  the  sands,  so  far  as  public  discussion  of  social  prob- 
lems by  our  official  sociologists  is  concerned.5 


5  Force  versus  Credit. — Since  the  above  was  written  another  alleged 
tenet  of  the  socialist  movement  has  come  to  the  fore.  This  is  the 
proposed  overthrow  of  the  capitalistic  system  by  force,  and  the  transfer 
of  its  property  bodily  to  the  proletariat.  This  policy  is  justified  as 
being  warranted  by  the  increasingly  obvious  impotence  of  political  action 
to  ameliorate  the  condition  of  the  poor.  This  impotence  this  book 
everywhere  urges  as  a  fact,  yet  without  drawing  from  it  the  conclusions 
reached  by  the  socialists. 

As  to  just  how  far  this  policy  of  force  may  actually  be  advocated 
by  socialist  groups  in  America,  or  by  which  ones,  will  not  be  debated 
here.  That  question  of  fact  is  now  being  adjudicated  by  several 
tribunals.  Beyond  question,  the  policy  of  force  is  openly  avowed  by 
the  Eussian  revolutionary  government.  Unquestionably  that  govern- 
ment has  put  it  into  practice,  especially  in  relation  to  the  ownership 
of  land.  Since  that  has  occurred  in  Eussia  America  has  become  a  field 
for  similar  propaganda,  until  the  zeal  for  it  has  been  temporarily 
checked  by  resistance. 

But  space  will  not  be  wasted  here  upon  these  questions  of  exact 
degree  of  fact  at  the  moment,  because  the  writer,  if  he  knows  anything 
about  social  evolution,  knows  that,  once  a  party  has  espoused  the 
erroneous  class-distinctive  economic  philosophy  of  Marx,  it  is  only  a 
question  of  time  when  it  will  inevitably  reach  the  use  of  the  most 
unscrupulous  violence,  in  its  final  desperate,  but  vain,  effort  to  attain 
the  impossible — namely,  the  bodily  transfer  of  wealth  from  the  rich 
to  the  poor,  by  direct  attack,  whether  political  or  martial. 

For  it  is  to  be  emphasized  here,  as  the  final  fault  in  the  socialist 
program,  that  it  has  always  lacked  all  consideration  of  the  vital  need, 
in  any  form  of  economic  organization  for  mutual  life-support,  for  an 
adequate  system  of  credit.  It  has  quite  failed  to  appreciate  the  delicate, 
untransplantable  nature  of  that  vital  economic  organ. 

It  always  speaks  of  the  property  of  the  rich  as  if  it  were  a  tangible, 
transferable  thing,  which  the  rich  withheld  from  the  poor  through  force 
and  malice,  and  which  the  poor  might  take,  when  justified,  by  force. 
It  utterly  fails  to  realize  that  the  property  of  the  rich  does  not  lie  in 
the  vast  system  of  visible  appliances  of  industry,  but  in  those  delicate 
credit-instruments  which  alone  make  possible  the  productive  use  of  those 
appliances  by  society. 

It  overlooks  the  fact  that  the  degree  of  productive  usefulness  of  those 
appliances  depends  upon  the  vigor  of  the  people's  credit-system,  varying 
from  day  to  day  as  credit-securities  fluctuate  in  Wall  street,  through 
all  the  wide  range  from  prosperity  to  hard  times,  with  its  unemployment 
and  bitter  hardship  on  the  poor.  It  completely  neglects  the  fact  that 
any  collapse  in  these  securities  must  immediately  paralyze  every  work- 


758  MODERN    ECONOMIC    TENDENCIES 

The  Need  for  Social  Faith. — Yet  another  vital  factor — faith 
on  both  sides  in  the  sincerity  of  the  other — is  also  conspicuously 

man's  effort  to  use  any  appliance,  thereby  doubly  impoverishing  the 
poor. 

This  is  not  reason  for  urging  the  continuance  of  control  by  the  rich. 
It  is  reason  for  facing  the  fact  that  the  property  of  the  rich,  in  indus- 
trial America,  can  never,  by  any  power  of  the  majority,  be  transferred 
bodily  to  the  poor,  as  the  land  has  been  transferred  in  Russia.  For  the 
land  stays  there,  undiminished,  while  being  transferred;  but  the  credit- 
property  of  rich  America  will  evaporate  into  nothingness,  before  even 
the  threat  embodied  in  the  first  vote  of  the  majority  against  it  could 
be  recorded  by  the  secretary  of  state,  or  the  first  effective  armed  troop 
be  mobilized  for  assaulting  the  safe-deposit  vaults. 

Indeed,  Eussian  bolshevism  is  now  learning  this  bitter  lesson  through 
experience.  Its  attacks  by  force  upon  the  banks  netted  it  virtually 
nothing.  The  bank's  books  showed  deposits  amounting  to  hundreds 
of  millions  of  rubles.  This  money  was  demanded.  Yet  actually  only 
a  few  millions  of  cash  were  to  be  found  in  the  vaults.  The  rest  was  all 
credits;  and  those  credits  collapsed  into  nothingness  the  instant  bol- 
shevism reared  its  head. 

The  division  of  the  land  among  the  peasantry  by  the  bolshevists,  a 
measure  which  probably  embodied  some  approach  to  justice,  has  already 
resulted,  we  are  told,  in  the  accumulation  of  immense  stores  of  farm- 
products  in  the  country-districts.  Yet  the  cities  are  starving  and  freez- 
ing! There  are  no  railway-facilities;  and  railways  cannot  be  operated, 
nor  rolling-stock  built,  it  now  develops,  without  an  adequate  national 
credit-system. 

In  this  matter  of  providing  a  competent  system  of  credit  lies  the 
last  item  of  contrast  between  consumerism  and  socialism.  Socialism, 
based  upon  the  wage-earning  producer  as  its  unit,  can  never  evolve  a 
stable  system  of  credit.  Consumerism,  based  upon  the  Ultimate  Consumer, 
the  spender  of  money,  as  its  unit,  lays  its  foundation  upon  what  is 
to-day,  always  has  been  and  always  must  be,  the  sole  source  of  all 
economic  credit — the  Ultimate  Consumer — who  links  together  manufac- 
ture and  consumption  into  the  only  combination  really  productive  of 
life-support. 

For  the  one  lesson  which  even  the  intellectual  socialists  seem  unabla 
to  learn  is  that  what  they  call  production — bare  manufacture — is  not 
production  at  all,  but  a  bootless  waste  of  effort,  until  it  has  been 
linked  with  consumption.  For  the  sole  thing  wanted  by  man  is  not 
commodities,  but  life-support;  and  commodities  do  not  become  life' 
support  until  they  have  reached  the  Ultimate  Consumer. 

It  is  not  a  question  of  transportation.  That  we  include  in  the  term 
manufacture.  It  is  a  question  of  identification — identification  of  the 
consumer  for  the  goods,  and  of  the  goods  for  the  consumer.  This  can  be 
accomplished  only  by  the  Ultimate  Consumer.  This  even  the  Ultimate 
Consumer  can  accomplish  only  after  he  has  created,  as  the  all-essential 
economic  catalytic,  an  adequate  system  of  credit,  organized  over  a 
territory  knowing  neither  sea  nor  mountain  nor  map  as  a  divider  of 


THE   REMEDY — CONSUMERISM   AND   CONSIDERATION       759 

lacking.  For  on  each  of  the  many-sided  quarrels  the  supposed 
facts  are  largely  mistaken.  Each  side  sees  in  the  other's  sincere 
faith  only  malice,  greed,  laziness  or  dishonesty,  instead  of  natural 
error.  Therefore  in  each  case  both  the  philosophies  and  the 
acts  resultant  from  these  errors  become  grotesque,  inconsistent 
and  cruel.  Yet  in  each  case  they  are  indubitably  patriotic  in 
intent. 

In  the  name  of  humanity,  what  a  pity  that  these  leaders 
among  the  radicals  cannot  revolt  completely  from  the  error  of 
the  high-wage  philosophy  now,  while  there  is  yet  time,  and  that 
the  prominent,  liberal  commercialists  cannot  meet  them  halfway 
on  the  road  to  common  sense,  by  a  rational  revolt  against  the 
cruelties  of  high  prices,  and  the  hypocrisies  of  advertising,  and 
the  sneaking  selfishness  of  interest-drawing,  of  commercialism ! 

Growing  Dogmatism. — But  there  seems  to  be  no  hope.  Of 
the  unyielding  attitude  of  the  commercialists  naught  need  be 
said.  Yet  the  socialists  are  just  as  unreasoning.  Thus  the 
program  of  the  Intercollegiate  intellectuals  for  the  winter- 
season  of  1917-18  publishes  the  tentative  suggestion  that  this 
year,  in  addition  to  the  regular  meetings,  there  should  be  or- 
ganized 

"elementary  and  advanced  classes  for  the  study  of  socialism. 
It  was  hoped  that  the  group  attending  the  advanced  course 
might  carefully  and  critically  analyze,  throughout  the  year, 
the  economic  theories  of  socialism,  with  a  view  to  seeing  what, 
if  any  respects,  these  theories  should  be  revised  in  the  light 
of  modern  developments."  (Italics  mine.) 

This,  then,  is  the  sole  response  (and  even  this  was  never 
followed  out)  of  the  brains  of  the  socialist  movement  to  the 
cogent  events  of  the  war — the  collapse  of  the  whole  interna- 
tional socialist  organization  and  policy,  with  the  gravitation  of 

that  economic  system  which  has  already  been  welded  into  a  de  facto 
unity  by  the  railroad,  the  steamship,  the  cable  and  the  wireless. 

Yet  let  not  the  reader  gloat  too  hastily  over  this  indictment  of 
socialism  for  its  lack  of  a  credit-system.  The  one  greater  error  than 
to  believe  in  socialism  is  to  believe  that  the  commercial  credit-system 
can  endure  more  than  a  few  short  years  more.  The  first  act  of  the 
revolution,  if  it  is  to  come,  will  be  staged  upon  the  collapse  of  the 
world-system  of  commercial  credit.  The  last  act  will  ring  down  the  cur- 
tain forever  upon  credit  in  the  socialistic  scheme,  based  upon  the  sov- 
ereignty of  the  wage-earning  producers.  (February,  1920.) 


760  MODERN   ECONOMIC   TENDENCIES 

each  group  into  its  political  and  loyal,  rather  than  its  economic 
and  humanitarian,  affiliations;  the  split  of  the  movement  in 
America  into  two,  with  the  half  which  has  proven  disloyal  to 
every  American  political  tradition  doing  nothing  worse  than 
standing  loyal  to  economic  ideas  which  have  not  yet  been  de- 
nounced by  the  departing  half;  the  later  triumph  of  the 
orthodox  and  unpatriotic  half,  led  by  Hillquit  on  a  platform 
of  open  opposition  to  the  war,  in  the  most  successful  Socialist 
mayoralty  campaign  ever  waged  in  New  York;  and  the  de- 
nunciation of  each  half  by  the  other  as  disloyal  and  treason- 
able !  Shades  of  the  Girondins !  Was  there  ever  a  finer  reflec- 
tion of  the  ethics,  and  a  foreshadowing  of  the  cruelties,  of  the 
French  Revolution ! 

Every  one  of  these  schisms  was  indicated,  long  before  the 
war  began,  by  the  inconsistency  of  the  class-struggle  doctrine 
with  all  the  events  of  past  history,  just  as  much  as  with  current 
events.  Every  one  of  these  defaults  and  splits  is  inevitable  so 
long  as  the  movement  as  a  whole  clings  to  the  fundamental 
economic  error  of  the  wage-philosophy.  But  this  is  the  one 
common  platform  upon  which  these  warring  factions  still  re- 
main united. 

But  why,  oh  Intellectuals,  do  you  await  this  late  date  before 
fully  and  frankly  correcting  the  error  in  your  philosophies? 
Why,  oh  Commercialists,  are  your  nostrils  plugged  to  the  scent 
of  volcanic  sulphur?  Or  why  do  you  still  believe,  after  man- 
kind's history,  from  Caesar  to  Kaiser,  that  social  volcanoes  can 
be  plugged  by  force — by  imprisonments,  deportations  and  the 
similar  devices  of  the  superficial,  the  panic-stricken  and  the 
stupid  ? 

Consumeration. — The  policy  of  having  the  Ultimate  Con- 
sumers, when  organized  in  aggregate,  follow  this  doctrine  of 
Consumerism  into  action — of  acquiring  complete  control  of  all 
industrial,  commercial  and  financial  plant  and  stock,  not  through 
the  political  government,  but  by  exercise  of  economic  sover- 
eignty; not  for  the  purpose  of  making  money  out  of  them,  but 
solely  in  order  to  provide  the  community  with  life-support — 
will  be  called  Consumeration.  However  the  transfer  from  the 
present  system  may  be  brought  about  (which  is  itself  a  huge 
problem)  Consumerism  and  Consumeration  must  be  based  upon 
these  following  items  of  principle  or  policy,  namely: 

(1)   The  Ultimate  Consumers,  suitably  aggregated  and  simply 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       761 

organized,  are  to  own  all  plant  and  stock  involved  in  supplying 
themselves  with  what  they  wish,  from  the  time  the  latter  leaves 
the  hands  of  its  original  producer  until  it  reaches  the  premises 
of  its  Ultimate  Consumer.  In  other  words,  there  are  to  be  in 
the  entire  industro-commercial  system  only  two  transfers  of 
ownership  for  each  article,  namely: 

(A)  From  the  producer  to  the  Consumers-in-Aggregate,  at 
the  point  of  original  productive  effort.     In  the  majority  of 
cases  this  will  mean  merely  the  payment  of  wages  for  labor, 
as  now,  which  labor  operates  upon  raw  material,  or  partly  fin- 
ished goods,  which  never  cease  to  be  the  property  of  the  Con- 
sumers-in-Aggregate.     In   a   minority   of   cases,    as   with   the 
smaller  farmers  or  poultry-raisers,  for  instance,  the  produce 
itself  may  remain  the  property  of  the  producer  until  it  leaves 
his  premises. 

(B)  From    the    Consumers-in-Aggregate    to    the    individual 
Ultimate  Consumer,  when  the  finished  and  delivered  retail  com- 
modity is  passed  across  the  shop-counter  to  him,  or  is  left  by 
wagon  at  his  kitchen-door. 

In  neither  of  these  transfers  of  title  can  anything  akin  to 
bargaining  occur,  because  in  each  case  the  party  stating  the 
price  (the  agent  of  the  Consumers-in-Aggregate)  is  totally 
disinterested,  and  is  the  only  person  with  whom  to  negotiate. 
He  is  stating,  and  every  person  understands  that  he  is  stating, 
merely  the  result  of  statistical  compilations  of  costs,  supplies 
and  demands,  made  by  equally  disinterested  salaried  clerks,  with 
no  profits  made  anywhere.  He  has  no  motive  for  doing  otherwise. 

Travel  to  any  other  locality  would  merely  bring  one  face  to 
face  with  some  other  salaried  agent  backed  ly  these  same 
statistical  data  and  offering  exactly  the  same  price.  Not  a 
penny  is  to  be  gained  by  contentiousness.  There  can  be  no 
haggling,  that  curse  of  modern  life.  Every  transfer  of  title 
will  be  a  take-it-or-leave-it  proposition,  like  the  present  pur- 
chase of  postage-stamps.  Our  whole  present  furor  of  negotia- 
tion at  every  turn  of  life  will  drop  out  of  sight  forever. 

The  workman,  of  course,  may  select  his  work.  He  may,  and 
usually  will,  make  his  selection  with  an  eye  to  the  price  paid 
for  the  several  sorts.  But  he  will  never  dream  of  trying,  while 
his  choice  of  job  remains  fixed,  to  alter  the  pay  therefor  favor- 
ably to  himself. 

It  is  not  merely  that  he  will  be  up  against  a  resistance  which 


762  MODERN    ECONOMIC    TENDENCIES 

it  would  be  folly  to  encounter.  It  is  that  all  people  will  then 
be  fully  cognizant  of  the  fact  that  one  can  lose  as  much,  or 
more,  on  the  buying  end  of  life  as  can  be  gained  on  the  earning 
end;  and  that  raising  wages  raises  prices. 

For  any  one  man,  under  these  conditions,  to  start  the  pre- 
cedent of  trying  to  elevate  his  income  otherwise  than  by  pro- 
ducing more  for  the  community,  inciting  and  warranting  every 
other  person  to  start  the  same  campaign  of  price-raising  against 
him*  would  be  suicidal.  Only  a  few  fools  would  attempt  it, 
and  they  would  fail. 

All  persons  active  in  industry  or  trade  are  to  work  for  a 
publicly  known  wage  or  salary.  Every  activity  having  anything 
to  do  with  the  supply  of  any  commodity  or  service  sold  in  the 
open  market  is  to  be  recognized,  in  public  opinion  and  the  law, 
as  a  public  service  and  a  public  trust. 

Then  the  man  who  would  use  his  industrial  position,  whether 
as  a  ward-grocer  or  as  a  railway-director,  for  private  and  hidden 
profit  (as  a  thing  contrasted  with  his  earning  as  large  a  public 
salary  as  he  can  secure  by  giving  good  service)  will  have  to 
search  long  and  industriously  before  finding  an  opportunity. 
He  will  have  to  seek  even  further  before  finding  a  motive. 

Should  he  be  crazy  enough  to  do  such  a  thing  he  will  be 
ostracized  and  jailed  as  severely  as  would  now  be  a  judge  upon 
the  bench,  a  trustee  of  a  university,  or  a  legislator,  if  guilty 
of  the  same  act.  The  purely  arbitrary  and  meaningless  line 
which  we  now  draw  between  one  occupation  and  another,  as  to 
license  in  this  matter  of  making  secret  profits  without  equivalent 
service  to  the  Ultimate  Consumer,  is  as  absurd  as  any  of  the 
crudities  in  administration  which  prevailed  in  medieval  times. 

{2)  Purchasers  will  then  never  be  solicited.  Goods  are  to  be 
made  as  attractive  as  possible,  by  their  display  in  a  single, 
non-competitive  bazaar  or  market,  located  at  a  convenient  center 
in  each  ward  or  district;  but  there  will  be  no  advertising,  no 
hawking,  no  peddling,  no  soliciting.  Drumming  will  then  be 
recognized  in  law  as  it  is  now  partially  in  fact,  as  an  insult 
to  and  an  imposition  on  everyone  suffering  from  this  uninvited 
annoyance. 

Although  every  person  will  then  be  subject  to  an  emulation 
in  the  proficiency  of  performance  of  personal  duty  which  is  far 
more  intense,  because  more  free,  than  now,  yet  there  will  be 
no  commercial  competition  between  separately  owned  enter- 


THE   REMEDY — CONSUMERISM   AND   CONSIDERATION       763 

prises,  seeking  sales  and  profits  nominally  at  each  other's  ex- 
pense, but  always  at  the  expense  of  the  Consumer.  Every  factory 
teaches  that  monopoly  is  the  secret  of  efficiency. 

The  Ward  1  Bazaar,  for  instance,  will  naturally  be  in  rivalry 
with  the  Ward  2  Bazaar,  and  each  will  take  pride  in  making 
the  best  financial  showing  to  the  City  Auditor,  who  will  publish 
the  records  of  all  wards.  These  bazaars  will  naturally  compete 
as  high-schools  do  now.  But  the  Ward  1  Bazaar  can  sell  only 
in  Ward  1,  and  the  Ward  2  Bazaar  only  in  Ward  2. 

This  is  wholly  to  the  good  of  the  Consumer,  for  it  eliminates 
all  cross-shipments  and  duplications  of  bazaars;  while,  if  the 
superintendence  of  the  Ward  2  Bazaar  be  so  good  that  Ward 
1  Consumers  prefer  to  trade  there,  there  will  be  many  ways 
in  which  this  fact  can  be  given  effective  publicity.  Reputations 
may  be  transported  across  boundaries  without  cost  to  the  Con- 
sumer, but  not  commodities. 

There  need  be  no  worry  as  to  graft,  in  this  future  society. 
Graft  is  as  purely  a  feature  of  the  commercial  system  as  are 
street-signs  or  newspapers  mostly  advertising.  Graft  is  merely 
the  inevitable  injection  into  politics  of  the  principle  now  under- 
lying all  other  lines  of  public  service,  namely,  it  must  pay 
handsomely  or  it  must  cease.9 

e  One  of  the  surest  proofs  of  this  is  the  fact  that  the  corrupt  political 
machines  have  always  stood  in  opposition  to  public  ownership.  For 
under  public  ownership,  with  no  profits  made,  there  are  no  spoils  to 
be  divided. 

One  of  the  dramatic  incidents  of  the  preliminary  history  of  economic 
reform  is  that  of  the  Philadelphia  gas-works,  which  happened  by  chance 
to  be  one  of  the  few  instances  of  public  ownership  of  a  revenue-earning 
service  in  a  large,  politically  bossed  city.  For  years  Philadelphia's 
political  machine  operated  the  city's  gas-works  in  such  a  manner  as 
to  discredit  public  ownership.  The  annual  reports  of  the  superintendent, 
begging  for  extensions  and  improvements,  urgently  needed  in  view  of 
the  growing  population  served,  were  repeatedly  denied.  Money  properly 
belonging  to  the  gas-works  was  diverted  into  other  municipal  depart- 
ments, for  the  obvious  purpose  of  crippling  the  gas-works.  This  policy 
was  carried  to  the  point,  in  at  least  one  remarkable  instance,  where 
the  department  receiving  the  undeserved  funds  actually  protested  against 
having  any  more  money  thrust  upon  it,  because  it  had  wasted  all  it 
dared ! 

When  finally  the  machine  succeeded  in  accomplishing  the  passage  of 
a  bill  leasing  the  gas-works  to  the  United  Gas  Improvement  Company, 
in  1903,  it  was  against  an  opposition  of  all  the  better  elements  in 
Philadelphia  politics.  The  local  paper  describes  the  popular  indignation 


764  MODERN  ECONOMIC  TENDENCIES 

Personally,  grafters  are  as  purely  the  fruits  of  commercialism 
as  are  sandwich-men  or  ticket-choppers — results  of  the  deficit 
in  employment  created  by  the  presence  of  commercialism,  on 
the  one  hand,  and  of  commercial  standards  of  profiteering  upon 
the  other.  Once  abolish  commercialism  and  there  will  be  un- 
limited demand  for  effort  in  honest  lines,  and  no  pay  at  all 
for  grafters. 

(3)  No  interest,  dividends,  rent,  etc.,  will  be  paid  to  anyone 
for  the  private  ownership  of  anything.     Indeed,  no  one  will 
be  allowed  to  own  anything,  except  those  things  which  he  takes 
home  and  never  brings  back.     One  may  buy  anything  in  the 
land,  but  he  may  not  sell  it  again.     A  man  may  buy  a  street- 
car, if  he  wishes;  but  the  only  thing  he  will  be  permitted  to  do 
with  it  will  be  to  place  it  in  his  backyard,  as  a  playhouse  for 
his  children — or  possibly  for  himself  to  recline  within,  dream- 
ing of  the  golden  days  when  men  were  permitted  to  own  whole 
roads,  upon  which  the  millions  must  ride  and  pay  tribute,  or 
else  starve. 

(4)  Profits,  in  the-  sense  of  a  margin  over  all  costs,   are 
always  to  be  made,  by  every  enterprise  or  department.    This  is 
for  covering  variations  in  market  or  supply,  for  the  expansion 
of  facilities,  or  for  the  accumulation  of  stock  as  a  credit  sale- 
able to  other  departments.     But  these  profits  are  never  to  be 
divided  amongst  the  people,  nor  abstracted  from  the  department 
where  made — except  in  the  form  of  a  small  tax  to  support  the 
insane  and  other  helpless  persons.    Either  in  the  form  of  corn- 
over  the  act  as  being  " almost  a  riot."     The  police  were  required  to 
clear  the  galleries  after  the  demonstration  of  protest.     "From  all  over 
the  gallery  came  hisses  and  cries  of  ' thieves'." 

As  the  lease  was  passed  after,  and  in  spite  of,  an  offer  from  one 
of  the  city's  most  prominent  and  commercially  successful  citizens  to 
take  and  operate  the  works  for  the  public  good  upon  terms  far  better 
for  the  city  than  those  incorporated  in  the  lease,  and  since  the  record 
of  public  ownership  had  been  uniformly  successful,  this  indigation  is 
not  hard  to  understand. 

This  book  has  no  space  to  spare  for  an  entrance  upon  the  pros  and 
cons  of  public  ownership,  as  demonstrated  in  past  experience.  This  one 
instance  is  cited,  not  to  prove  that  public  ownership  is  good,  but  to 
reveal  clearly  just  where  and  what  are  the  forces  which  are  urging  us 
toward  private  commercialism,  and  which  are  discrediting  the  record 
of  what  economic  reform  we  happen  to  enjoy  already.  It  is  well  that 
the  people  have  now  had  a  little  education,  by  experience,  with  German 
propaganda. 


,       THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       765 

modities,  or  as  surplus  money  or  credit,  they  are  to  remain 
always  undivided,  the  property  of  the  Consumers-in- Aggregate, 
to  the  equal  enrichment  of  every  adult  citizen,  each  newborn 
babe  and  each  enterprising  immigrant. 

If  it  be  recalled  that,  under  Consumerism,  no  person  may 
enjoy  any  purchasing-power  in  any  other  form  than  as  a  credit 
upon  the  books  of  the  Community-bank — which  books,  so  far  as 
income  is  concerned,  are  open  to  the  public — it  will  be  obvious 
how  difficult  and  pointless  would  be  any  attempt  at  private 
profits,  graft  or  the  like,  under  that  system.  The  whole  back- 
ground for  the  present  belief  in  graft  as  a  human  tendency 
would  be  gone.  The  only  possibility  in  the  way  of  peculation 
will  be  the  petty  larceny  of  actual  cash  or  commodities;  and 
the  inducement  to  that  will  have  become  all  but  zero  by  the 
elimination  of  all  deficit  in  employment,  and  of  all  deficit  in 
the  purchasing-power  of  the  dollar. 

The  political  corruption  of  to-day  is  merely  one  department 
of  commercialism.  The  professional  politician  must  secure 
assurance  to  office  by  the  maintenance  of  a  political  machine, 
with  its  power  among  the  voters  assured  by  distributing  jobs 
to  them,  exactly  as  the  businessman  must  maintain  his  position 
in  the  business-world  by  the  constant  cultivation  of  an  organ- 
ization of  stock-holders,  directors,  aides  and  connections,  and  of 
fame  and  favor  amongst  the  consuming  public.  The  mailing- 
list  and  clientele  of  customers  which  is  the  foundation  of  every 
successful  business  is  not  merely  the  parallel,  but  the  progenitor, 
of  the  political  machine  of  the  ward-boss. 

Indeed,  between  these  two  methods  of  servile  fawning  for 
favor,  the  political  and  commercial  respectively,  the  author  can 
find  little  choice.  Under  commercialism,  one  is  as  inevitable  as 
the  other. 

In  the  field  of  politics  it  is  the  success  of  a  man  in  getting 
into  office,  and  not  his  efficiency  after  getting  there,  which 
marks  him  as  valuable.  In  commercialism  it  is  the  ability  to 
secure  the  business,  and  not  efficiency  in  its  performance 
afterwards,  which  earns  the  big  money. 

It  is  one  of  the  many  silent  credits  to  be  filed  in  favor  of 
the  statistical  argument  made  earlier  in  this  book  that  no 
attempt  was  made  there  to  include  in  it  the  data  as  to  the 
huge  profession  of  politics,  as  an  obvious  department  of  com- 


766  MODERN   ECONOMIC   TENDENCIES 

mercialism — as  inevitably  politics  must  be,  until  commercialism 
has  ceased  to  exist. 

The  trouble  with  this  country  is  not,  as  is  so  often  said,  that 
we  have  not  enough  of  business  in  politics.  The  trouble  is  the 
reverse  of  this.  We  now  have  too  much  business  in  politics. 
Any  at  all  is  too  much.  For  business  aside  from  politics, 
business  in  politics,  and  politics  as  a  business,  are  all  equally 
against  the  interests  of  the  people. 

(5)  General  government,  involving  only  questions  of  general 
policy  in  economic  and  industrial  administration,  will  then  be 
handled  as  now,  in  public  meeting,  by  voting  upon  the  principle 
of  a  vote  to  a  person.  But  this  applies  solely  to  intangible 
affairs.  In  the  industrial  system  the  prime  control  will  be 
effected  automatically  by  the  Ultimate  Consumer,  when  he 
makes  his  purchases  across  the  shop-counter. 

Confiscation. — It  is  an  axiom  among  men  that  possession  of 
a  natural  right  does  not  always  justify  its  enforcement  by 
violence.  The  sweeping  statements  which  appear  above,  to  the 
effect  that  the  Consumer  does  now  already  actually  own,  in 
equity,  by  right  of  past  payment  for  it  in  cash,  all  commercial 
and  industrial  property,  do  not  necessarily  imply  that  he  is  to 
seize  such  property  by  drastic  confiscation.  They  do  mean, 
however,  two  important  things. 

First,  there  can  be  properly  no  discussion  of  equities,  in  any 
question  as  to  the  transfer  of  industrial  property  from  private 
to  public  ownership.  The  equities  are  all  on  one  side. 

Secondly,  the  wiser  commercialists,  who  debate  these  matters 
in  their  larger  aspect,  must  have  a  careful  eye  to  the  future. 
The  evolution  of  historical  events  has  a  horrible  way  of  uncov- 
ering concealed  murder,  so  that  even  he  who  buys  may  read. 
Particularly  when  world-events  begin  to  crash,  in  some  great 
crisis,  do  facts  come  to  the  surface  and  coerce  public  opinion 
into  acrobatic  somersaults  such  as  could  never  be  imagined 
during  the  period  of  quiet  preparation. 

So  every  commercialist  should  take  careful  heed  as  to  what 
may  be  the  inevitable  sudden  overturn  of  public  opinion,  as  to 
recompense  for  his  property,  when  once  it  has  been  borne  in 
upon  public  consciousness,  as  suddenly  and  thoroughly  as  the 
firing  upon  Fort  Sumter  revealed  to  the  people  the  true  nature 
of  slavery,  that  all  those  facilities  have  already  been  paid  forf 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION       767 

in  cash,  by  the  Ultimate  Consumer — perhaps  several  times  over 
— and  that  commercialism  is  inherently  opposed  to  democracy. 
He  should  make  careful  calculation  of  his  chances  for  receiving 
then  any  compensation  whatever. 

Incomes  under  Consumerism. — Then  as  to  incomes,  after 
commercialism  shall  have  been  abolished.  Under  a  national 
factory-system  each  citizen  will  be  paid  what  the  Consumer 
thinks  he  is  worth,  as  his  efforts  are  appraised  automatically 
by  the  Consumer's  selections  at  the  shop-counter.  The  great 
majority  will  then  earn  far  more  than  now,  in  purchasing-power, 
because  they  produce  what  the  people  really  want. 

But,  on  the  other  hand,  those  who  can  do  nothing  well  but 
bargaining — whether  upon  the  scale  of  the  petty  salesman, 
drummer  or  pedlar,  that  of  the  professional  advertiser,  or  that 
of  the  financial  or  industrial  magnate — will  then  be  reduced 
to  contentment  with  what  he  can  actually  produce.  In  some 
cases  this  will  still  be  far  above  the  average  craftsman's  wage, 
for  superintendence  will  always  be  needed,  and  concealed  within 
the  now  wasteful  activities  of  many  big  businessmen  lies  poten- 
tial a  great  power  for  good  for  the  people.  But  of  this  no  one 
can  then  complain,  because  each  will  then  receive  only  in 
equivalence  to  what  he  gives  society. 

Jewishness. — Usually,  however,  the  commercialist  will  be 
dropped  many  pegs  down  the  scale  of  social  importance,  as 
measured  by  income.  Chief  among  the  illustrations  of  this 
hurling  of  the  mighty  from  their  usurped  thrones  will  be  that 
race  which  has  always  received  in  all  lands — however  wrongly 
—widespread  contempt  for  its  assiduity  in  bargaining,  its  cheap 
display,  its  persistent  intrusiveness  and  its  alleged  lack  of  civic 
pride — the  Jew. 

These  traits,  the  weaker  characteristics  of  a  race  of  ancient 
traditions  of  greatness,  of  marked  spirituality  in  some  lines,  of 
deep  domestic  devotion,  of  greater  temperance  in  drink  than 
any  gentile  race,  and  of  unquestionable  possibilities  for  great 
good,  have  been  fostered  into  over-prominence  by  the  defective 
philosophy  of  the  commercial  system.  This  is  because  com- 
mercialism wrongly  relies  upon  cupidity,  intrusiveness  and  cheap 
display  as  the  most  effective  motive  forces  within  mankind. 

Therefore  let  no  person  who  has  ever  been  guilty  of  saying 
that  selfishness  is  the  only  human  trait  upon  which  to  rely, 
ever  complain  of  the  intrusive  ubiquity  of  the  Jew.  For  it  is 


768  MODERN   ECONOMIC   TENDENCIES 

this  faith  within  the  gentile,  upholding  the  commercial  system, 
which  is  to-day  forcing  the  Jew,  and  jewishness  in  its  worst 
sense,  into  prominence  and  power.  Such  a  system  as  that  in- 
vites every  bit  of  jewishness  latent  within  either  Jew  or  gentile 
to  come  into  the  open,  and  gives  it  power  to  inflict  itself  upon 
humanity.7 

Natural  Economics  and  Ethics. — So,  with  all  incomes 
equated  with  natural  ability  to  serve,  under  the  coming  national 
factory-system — with  forced  unemployment  gone,  and  with  all 
opportunity  for  making  money  by  display  abolished — the 
modesty  and  good  taste  of  the  artist  will  be  revealed  in  many 
a  heart  never  suspected  now  of  sheltering  those  traits.  No  one 
will  then  wish  for  more  wealth  than  his  family  can  actually 
enjoy  in  quiet  tastefulness.  Those  lacking  taste  will  also  lack 
opportunity  to  display  that  fact. 

Even  cities,  in  their  present  sense,  will  then  no  longer  exist. 
For  all  such  things  as  grand  opera,  for  instance,  will  no  longer 
be  an  excuse  for  crowding  people  into  a  few  large  centers  each 
winter;  for  grand  opera  will  then  be  performed  in  a  hundred 
places  to  its  present  one,  and  at  prices  which  all  can  afford. 
As  for  the  present  dazzling  combination  of  hotels,  clubs  and 
tawdry  theaters,  as  a  rendezvous  for  fashion  supported  by 
dividends,  that  will  be  revolting  to  the  non-commercial  society, 
as  inexpressibly  ostentatious  and  vulgar. 

In  every  aspect  of  life  the  present  temptation  to  display  and 
excess  will  have  fallen  away.  Life  will  everywhere  assume 
more  the  aspect  of  the  old-fashioned  college-town — not  the 
modern  one,  drunken  with  this  same  poison  of  young  men  with 
swollen,  unearned  incomes — but  the  older  classic  shades,  now 
soon  to  be  glorified  anew  by  their  ability,  and  their  renewed 
freedom,  to  give  the  devotees  of  wisdom  and  art  the  best  the 
world  has  to  offer. 

7  The  author  is  quite  free  from  any  prejudice  against  the  Jewish  race. 
He  wishes  merely  to  turn  to  good  account,  in  the  interest  of  the  many 
wage-earning  Jews,  what  prejudice  may  exist  anywhere  against  the 
profit-seeking  Jews.  As  a  matter  of  fact,  in  the  last  instance  of 
contrast  between  Jew  and  gentile  which  happened  to  enter  his  ex- 
perience— occurring  in  a  firm  composed  of  two  American-born  gentiles 
and  one  Jew — it  was  the  Jew  who  proved  himself  both  gentleman  and 
patriot,  while  the  two  gentiles  proved  themselves  both  snobs  and  traitors, 
selling  out  their  partner  and  their  souls  for  a  sum  quite  too  large  for 
such  microscopic  articles  as  the  latter. 


THE   REMEDY — CONSUMERISM   AND    CONSUMERATION       769 

The  Program  of  Economic  Reform. — The  question  as  to 
how  to  reach  the  natural  goal  of  our  social  economic  evolution, 
as  intimated  above,  is  a  far  more  difficult  one  than  its  mere 
definition — although  even  as  to  this  latter,  our  present  public 
opinion  is  in  a  quite  chaotic  state  of  disagreement.  In  this 
book  we  have  been  led  pretty  directly,  by  our  analysis  of  facts, 
into  conclusion  as  to  the  general  form  of  economic  society  which 
eventually  must  survive;  but  as  to  the  means  for  arriving  at 
that  destination  every  indication  has  been  negative. 

The  most  important  fruit  of  our  work,  indeed,  has  been  our 
proof  of  the  most  important  fact  of  all  current  history,  namely, 
that  no  remedy  yet  practiced,  nor  even  suggested,  has  shown 
any  sign  of  accomplishing,  nor  of  being  able  to  accomplish  in 
the  future,  any  gradual,  comfortable  reversal  of  our  present 
uncontrollable  tendency  to  expand  our  commercialism. 

This  sweeping  statement  applies  directly  to  the  plan,  so 
popular  with  the  better  poised  radicals,  for  acquiring  public 
utilities  by  purchase.  The  plan  sounds  simple,  easy  and  effica- 
cious. As  a  matter  of  fact,  it  is  none  of  these. 

There  is  no  person  worse  deceived  than  he  who  says:  "Oh, 
yes.  Commercialism  is  bad,  but  the  remedy  is  obvious.  Let 
the  cities  buy  the  street-car  systems  and  the  government  the 
railroads,  then  the  coal-mines,  then  the  oil-wells,  etc.,  and  soon 
everything  will  be  right." 

The  author,  starting  in  1889  with  a  recognition  of  the  evil 
of  commercialism,  himself  believed  just  that  for  twelve  or 
fifteen  years.  But  the  continued  study  of  social  problems  forced 
him  to  see  the  impracticability  of  any  such  a  comfortable  plan 
as  that.  The  trouble  lies  in  the  perversity  with  which  every 
purchase  of  a  utility  by  the  public — as  well  as  every  lost  day 
of  time  in  which  we  do  nothing — only  increases  the  volume  of 
commercialism. 

So  there  are  only  two  practicable  positions  for  the  man-in- 
the-street  to  take.  One  is  to  be  an  out-and-out  commercialist, 
defending  every  feature  of  the  present  system.  The  other  is 
the  far  more  uncomfortable  one,  demanding  great  mental 
courage,  of  regarding  commercialism  as  basically  wrong  and 
as  certain  soon  to  fall,  and  yet  holding  that  no  known  weapon 
of  attack,  including  public  ownership,  is  competent  to  check 
its  growth  and  reverse  it  into  a  gradual  abolition. 

This  is  not  because  public  ownership,  when  unburdened  with 


770  MODERN    ECONOMIC   TENDENCIES 

interest-charges,  or  when  complete  as  a  national  policy,  is  not 
desirable.  It  is  because  fractional  purchase  at  this  time  would 
increase,  rather  than  lessen,  these  burdens.  It  would  be  a  step 
away  from,  rather  than  toward,  the  true  goal. 

For  any  such  a  purchase,  at  any  valuation  approaching 
current  commercial  appraisals,  and  paid  for  in  interest-bearing 
bonds,  is  a  swindle  to  the  people.  The  swindle  lies  not  merely 
in  the  price  to  be  paid,  for  that  would  be  negligible  if  it  only 
bought  us  economic  liberty.  But  it  does  not.  Under  present 
conditions  it  would  buy  us  only  a  further  weighting  of  our 
yoke,  while  losing  us  invaluable  time.  Incidentally,  it  would 
add  to  the  accumulation  of  supposed  evidence  against  public 
ownership,  in  its  failure  to  cure  instantly  our  visible  economic 
ills. 

The  Fluidity  of  Economic  Causes  and  Effects. — For  the 
prime  fact  to  be  remembered  by  both  sides  of  the  public-owner- 
ship debate  is  that  the  public  owenrship  of  any  given  service — 
urban  transit,  for  instance — is  not  to  be  expected,  even  in 
theory,  to  improve  that  service  appreciably.  It  may  reduce  fares 
slightly;  but  it  can  do  even  this  only  momentarily,  because 
commercialism  rampant  everywhere  else  is  raising  the  prices 
of  all  materials,  and  hence  also  wages,  so  rapidly.  It  may 
reduce  somewhat  the  crowding  in  non-rush  hours,  but  it  cannot 
possibly  reduce  the  congestion  in  rush-hours.  It  cannot  reduce 
even  the  price  by  any  proportion  approaching  what  the  statistics 
displayed  in  this  book  might  lead  one  to  expect. 

The  reason  for  all  this  is  that  the  evils  which  are  obvious 
in  our  transit-problem  to-day  are  not  due  to  the  commercialism 
active  within  the  transit-system,  but  to  that  vastly  larger  volume 
of  commercialism  prevalent  everywhere  outside.  The  trouble 
with  our  railroads,  whether  urban  or  interurban,  is  chiefly  high 
wages  and  prices  for  supplies.  The  commercialism  within  its 
own  confines  is  but  a  minor  feature,  compared  with  that  outside, 
because  its  own  field  is  relatively  a  monopoly,  whereas  the  ex- 
ternal field  of  wages  and  prices  is  one  of  unlimited  costs  of 
universal  competition.  This  external  difficulty  the  public  own- 
ership of  .the  transit-systems,  even  if  it  could  be  carried  out 
by  means  of  non-interest-bearing  bonds,  bought  with  money 
which  was  not  allowed  to  re-invest  itself  in  commercialism, 
cannot  hope  to  touch. 

In  a  previous  chapter  it  was  shown  that  congestion  in  cities 


THE   REMEDY — CONSUMERISM   AND   CONSUMERATION        771 

is  not  the  result  of  the  paucity  of  transit-facilities,  but  is  a 
tendency  enforced  by  commercial  forces  at  work  everywhere, 
which  tendency  proceeds  always  as  far  as  the  transit-facilities 
will  permit.  Hence  more  transit-facilities  permit  more  conges- 
tion. Our  modern  congestion  in  cities  exists,  among  other 
reasons,  because  of  our  wonderful  development  of  transit- 
facilities. 

Therefore,  any  improvement  in  our  transit-facilities,  whether 
in  their  physical  form  or  in  price,  through  public  ownership, 
can  only  increase,  rather  than  decrease,  congestion,  discomfort 
and  discontent ! 

But  this  fact  that  any  isolated  bit  of  public  ownership  can- 
not improve  its  own  field  of  action  more  than  slightly — or 
perhaps  visibly  not  at  all — striking  as  it  may  seem,  is  never- 
theless irrelevant  to  the  problem  of  economic  reform,  except 
in  the  connection  given  here.  For  it  proves,  not  that  public 
ownership  must  always  be  futile,  when  adopted  as  an  exclusive 
national  policy,  but  that  its  good  fruits — like  all  economic  effects, 
whether  good  or  bad — are  fluid.  They  soak  away  from  their 
source  into  other  economic  fields,  and  reach  the  Ultimate 
Consumer  only  after  infinite  intermixture  with  other  economic 
factors. 

The  Post-Office. — Take  for  example  the  post-office,  which 
has  been  publicly  owned  for  over  a  century.  It  has  always  been 
of  great  value  to  the  people  to  have  it  publicly  owned.  How- 
ever commercialists  may  sneer  at  its  obvious  faults,  no  one 
dares  to  suggest  its  commercial  incorporation. 

Yet  the  employees  of  the  post-office  are  not  appreciably  better 
off  than  those  of  private  concerns.  The  conclusion  from  this 
is  not  that  public  ownership  is  unprofitable,  but  that  it  is 
incomplete.  For  the  good  evolved  by  the  post-office  goes  not 
to  its  employees,  but,  like  the  good  or  bad  evolved  in  every 
other  economic  activity,  to  the  tens  of  millions  of  Ultimate 
Consumers. 

For — it  cannot  be  repeated  nor  emphasized  too  often — it  is 
not  whence  a  man  draws  his  pay  which  measures  his  welfare, 
lut  where  lie  spends  his  money;  and  the  employees  of  both 
postal  and  private  industries  buy  in  the  same  shops. 

In  general,  the  percentage  of  improvement  in  the  welfare 
of  the  people  naturally  to  be  expected  from  any  given  bit  of 
public  ownership  is  merely  that  which  the  reduction  in  volume 


772  MODERN   ECONOMIC   TENDENCIES 

of  commercialism  due  to  this  isolated  lit  bears  to  the  aggregate 
volume  of  commercialism  in  the  entire  country.  But  this,  as  we 
have  seen,  is  a  percentage  always  very  small,  and  one  which 
is,  as  apt  as  not,  to  be  made  zero  or  negative  by  attempts  at 
public  purchase. 

The  Parcel-Post. — Finally,  consider  the  effect  upon  the 
nation's  total  volume  of  commercialism  of  any  such  an  exten- 
sion of  public  ownership  as  the  inauguration  of  the  parcel-post, 
as  a  means  for  the  much  hoped  for  gradual  abolition  of  com- 
mercialism. This  recent  step  in  advance,  it  must  be  remembered, 
was  not  saddled  with  a  dollar  of  expense  for  buying  out  the 
existing  private  express-companies,  as  is  usually  the  case  with 
projects  for  public  ownership.  Its  inauguration,  so  far  as  these 
were  concerned,  amounted  to  sheer  confiscation.  Yet,  even  under 
these  favorable  conditions  of  installation,  this  drastic  move 
succeeded  in  canceling  only  such  an  amount  of  total  com- 
mercialism as  the  normal  expansion  of  the  latter  makes  good 
about  every  ten  days! 

In  the  ordinary  course  of  events  we  can  hope  to  get  such  a 
step  as  the  parcel-post  taken  only  about  once  every  ten  years, 
if  that  often.  Yet  there  are  still  educated  people  who  point 
to  the  parcel-post  and  similar  governmental  measures,  and 
seriously  argue :  "Are  we  not  plainly  making  gradual  progress 
in  the  abolition  of  commercialism?" 

Competition  and  Confiscation. — It  should  be  noted  that  the 
government's  inauguration  of  the  parcel-post  amounted,  in 
effect,  when  viewed  from  the  position  of  the  owners  of  the 
express-companies,  to  a  confiscatory  policy  more  drastic  than 
any  urged  in  these  radical  pages.  It  was  more  drastic  than  any 
advocated  by  any  radical  platform  known  to  the  author,  except 
those  advising  open  loot  or  sabotage  by  violence. 

To  advocate  any  such  a  policy  generally,  openly  calling  it 
confiscation,  would  be  to  invite  an  avalanche  of  denunciation 
from  the  entire  orthodox  press.  Yet,  just  because  the  parcel- 
post  enterprise  was  called  "competition,"  it  went  through  with- 
out more  than  a  ripple  of  protest — with  approval  by  the 
majority,  indeed. 

Yet  the  fact  is  that  commercial  competition  and  confiscation 
are,  in  effect,  one  and  the  same  thing.  When  the  businessmen 
once  comprehend  this  identity,  they  and  the  radicals  will  be 


THE   REMEDY — CONSUMERISM   AND   CONSIDERATION       773 

in  far  less  danger  of  dropping  the  national  basket  of  eggs 
between  them. 

Therefore  this  book  does  not  counsel  any  drastic  confiscation 
of  these  properties,  so  sorely  needed  and  already  paid  for,  by 
the  public.  It  is  not  merely  that  those  whose  acts  have  brought 
upon  us  our  present  situation  have  acted,  usually,  in  personal 
innocence,  guided  by  maxims  which  are  all  but  universally 
accepted  by  the  people  as  "good  business,"  and  which  are  prac- 
ticed by  every  petty  tradesman.  It  is  merely  that,  beyond  all 
questions  of  equity,  and  in  spite  of  the  fact  that  for  many 
years  the  commercialists  have  been  actively  confiscating  the 
property  of  the  Consumer,  confiscations  of  commercial  property 
by  the  people,  in  return,  would  be  a  most  mistaken  policy — a 
boomerang  sure  to  react  soon  in  a  greater  virulence  of  com- 
mercialism, posing  then  as  a  martyr  triumphant  over  perse- 
cution. 

So,  even  to  those  who  are  impatient  to  have  the  state  pur- 
chase these  properties,  our  advice  is — wait!  The  bargain  will 
improve  with  time.  The  day  is  soon  coming,  forced  upon  us 
by  the  commercialists  themselves,  when  these  properties  can 
be  had  without  either  purchase  or  confiscation.  For  they  will 
then  be  worth  just  what  negro-slaves  and  confederate  money 
are  worth  to-day.  And  the  present  value  of  these  latter  proper- 
ties, it  must  not  be  forgotten,  are  the  result,  not  of  any  de- 
liberate confiscation,  but  of  a  policy  which  the  Southern  slave- 
owners themselves  enforced  upon  a  reluctant  North.8 

Consistency. — Should  these  conclusions  as  to  the  inevitable 
eradication  of  all  commercialism,  even  under  a  non-confiscatory 

sThe  possible  purchase  of  public-service  properties  by  the  people,  at 
commercial  valuations,  is  beginning  to  loom  large  before  the  business- 
world  as  a  new  channel  for  the  unloading  upon  the  Consumers  of  a 
vast  new  flood  of  interest-bearing  securities.  The  following  is  quoted, 
as  a  most  significant  sign  of  the  times,  from  the  New  York  Times 
for  Nov.  2,  1918: 

"At  the  conference  of  the  American  Electric  Eailway  Association 
in  the  Engineering  Societies  Building  yesterday  a  resolution  was 
introduced  recommending  that  the  member  companies  facilitate  the 
municipal  ownership  of  the  electric  railway-systems.  There  were 
present  representatives  of  about  85  per  cent  of  the  electric  railway 
properties  of  the  United  States,  of  the  value  of  about  $6,000,000,000. 
The  resolution  was  the  first  concrete  movement  for  the  transfer  of 
this  vast  amount  of  property  to  public  control. " 


774  MODERN   ECONOMIC   TENDENCIES 

policy,  appear  to  any  reader  as  too  drastic  for  acceptance,  the 
author's  sole  warrant  for  his  position  is  to  refer  back  to  page 
144.  There  he  challenged  any  commercialist,  or  any  body  of 
commercialists,  after  taking  due  thought,  to  disagree  with  the 
author  as  to  the  promptness,  thoroughness  and  rigor  with  which 
any  capitalist-employer  in  the  land  would  eject  summarily  from 
his  factory-premises  every  vestige  of  ownership-in-industry, 
if  he  should  some  day  find  it  lodged  there,  enforcing  an  im- 
mediate and  complete  return  to  the  pure  non-owning  factory- 
system. 

Yet  the  horror  and  indignation  with  which  this  supposititious 
employer  would  view  his  cherished  factory  (whose  efficiency 
is  the  pride  of  his  life)  when  thus  poisoned,  stunted  and  de- 
formed by  this  economic  parasite,  as  a  leper  by  his  germs,  would 
be  slight  when  compared  with  the  Ultimate  Consumers'  present 
view  of  the  industrial  system  as  a  whole,  which  he  alone  sup- 
ports. For  he  would  see  in  it  its  current  condition  of  growing, 
malignant,  commercial  leprosy — leaving  in  action  but  maimed 
fragments  of  our  normal,  potential  productivity — not  only 
paralyzed  in  usefulness,  but  covered  with  hideous  sores  of  dis- 
content at  that. 

The  sole  possible  point  of  difference  between  author  and 
reader  must  be  as  to  premises,  not  as  to  conclusions.  If  the 
Ultimate  Consumer  does  support  the  entire  industro-commercial 
system,  as  the  author  contends,  then  these  drastic  conclusions 
stated  above  are  inevitable.  If  not  so,  then  the  author's  entire 
philosophy  falls  to  the  ground,  as  a  delusion  as  powerless  to 
spread  as  the  dream  of  a  lunatic — and  is  not  worthy  of 
refutation. 


CHAPTEE  XXV 

THE   PATH   BEFORE   US 

WHAT  has  preceded  herein  has  been,  as  nearly  as  the  author 
could  make  it,  impersonal  and  scientific,  beyond  debate.  It  is 
difficult  to  see  how  anyone  who  accepts  the  factory-system 
can  dodge  its  conclusions,  except  by  impeaching  our  best  ac- 
credited sources  of  national  statistics. 

But  at  this  point  the  author's  proper  function,  which  is  that 
of  a  student  of  facts,  and  not  at  all  that  of  the  statesman  or 
man  of  affairs,  approaches  its  end.  Yet  it  may  not  be  amiss 
to  add  some  conclusions  as  to  the  path  before  us — conclusions 
for  which  he  is  responsible  in  a  less  scientific  degree — conclu- 
sions bearing  rather  the  nature  of  personal  opinions,  formed 
during  the  years  of  work  and  debate  incidental  to  the  prepara- 
tion of  the  more  rigid  statements  made  above.  Therefore  the 
following  suggestions  are  offered,  by  the  student  to  the  man 
of  affairs,  as  tentative  only. 

That  the  situation  makes  urgent  demand  for  immediate 
action  has  been  the  repeated  message  of  this  entire  book.  Ob- 
viously, to  all  peoples,  but  particularly  to  liberty-loving 
Americans,  an  immediate  alarm  and  summons  should  go  forth 
in  clarion  tones: 

"Organize  as  Ultimate  Consumers. " 

Into  this  organization  draw  every  adult  person,  without  regard 
to  sex,  race,  occupation  or  income!  The  sole  criterion  is 
whether  one  spends  money  or  not. 

Organize,  as  only  the  Ultimate  Consumers  can  do,  to  make 
your  nineteen-cent  dollar  a  hundred-cent  dollar  as  you  spend 
it.  Organize  to  make  employment  continuous  and  certain, 
always  exceeding  the  people's  natural  productivity.  Organize 
to  bring  production  into  vogue  again — not  by  relying  upon 

775 


776  MODERN    ECONOMIC   TENDENCIES 

exhortation,  but  by  so  directing  your  united  disbursements  that 
only  producers  receive  anything.  Organize  to  disperse  auto- 
matically our  congested  cities,  and  to  populate  the  waste-districts 
of  the  country  with  homes,  farms  and  gardens.  Organize  to 
assert  the  real  taste  of  the  people  for  the  beautiful,  so  that  the 
ugly,  degenerate  things,  born  of  competive  haste  and  con- 
gestion, shall  melt  away  into  the  splendor  of  natural  life. 
Organize  to  overthrow  the  yoke  of  the  dollar,  and  to  enthrone 
the  worth  of  humanity ! 

Yet,  when  once  this  organization  has  been  effected,  its  policy 
should  be  confined  to  activity  in  education.  Education  as  to 
true  radicalism  should  be  pushed  with  all  the  haste  and  energy 
of  a  military  campaign  in  the  face  of  an  advancing  enemy.  For 
time  is  of  inexpressible  value. 

But  naught  else  should  be  attempted  now.  The  reason 
for  this  is  that  your  aim  is  not  to  attack  commercialism  itself, 
for  that  cannot  be  touched  by  any  known  weapon,  short  of  a 
concerted  move  of  all  Consumers  to  abolish  it — an  act  which 
can  only  precipitate  complete  commercial  collapse  and  inaugu- 
rate revolution.  Your  inevitable  failure,  if  you  stop  short  of 
this,  will  bring  you  only  ridicule.  Your  very  heavy  responsi- 
bility, if  you  deliberately  start  to  do  this,  will  be  such  that 
few  careful  people  will  care  to  join  you. 

Moreover,  any  premature  precipitation  of  the  collapse  of 
commercialism,  by  attack  from  without,  is  apt  to  be  followed 
by  a  temporary  recovery  from  within,  prolonging  present  evils, 
and  delaying  and  exaggerating  the  final  crash.  This  is  the 
last  thing  desired.  Commercialism  should  be  left  alone  until 
it  commits  suicide,  as  negro-slavery  did — as  every  wrong  in- 
stitution has  done — in  so  thorough  a  way  that  later  revival 
is  beyond  debate. 

The  Pivotal  Fact  of  the  Immediate  Future. — Any  plan  for 
the  gradual  amelioration  or  cure  of  the  present  economic  situa- 
tion overlooks  the  basic  fact  of  the  very  nature  of  capitalism, 
namely,  that  it  lives  solely  upon  the  expectation  of  continually 
increasing  its  profits.  It  is  the  prospect  of  future  income 
which  alone  determines  the  valuation,  the  fluidity  and  the  social 
usefulness  of  its  vast  principal. 

Capitalism,  therefore,  can  no  more  stop  increasing  those 
profits  without  wholesale  collapse  than  a  bicycle-rider  can  stop 
without  tipping  over.  It  cannot  even  face  an  expectancy  of 


THE   PATH   BEFORE   US  777 

having  to  cease  its  accumulation  of  reinvested  profits,  dividends 
and  surplus,  and  avoid  collapse.  And  when  capitalism  col- 
lapses the  f  next  time,  every  class  must  suffer  hideously  from 
enforced  idleness,  famine,  anarchy  and  pestilence. 

For  when  capitalism  collapses  it  can  do  so  only  as  a  ruptured 
balloon  collapses — all  at  once.  Within  a  week  most  of  our 
factories  and  railroads  will  be  idle,  farm-produce  denied  access 
to  market,  congested  cities  starving,  and  labor  everywhere  un- 
employed— all  without  the  slightest  will-power  in  any  branch 
of  society  to  cure  this  paralytic  collapse. 

The  Detonator  and  the  High  Explosive.— The  problem  of 
the  immediate  future  pivots  centrally  upon  this  prime  fact, 
namely,  that  the  instant  that  capitalism  is  given  to  understand, 
by  an  expression  of  public  opinion  in  favor  of  any  reform 
whatsoever  which  indicates  plainly  the  people's  intent  to  remedy 
the  wrongs  of  commercialism,  or  to  arrest  its  further  accumula- 
tion of  profits — that  instant  it  collapses.  And  from  this  next 
collapse  of  valuations  there  can  be  no  recovery.  Whenever  it 
may  come  it  sounds  the  knell  of  commercialism. 

For  our  whole  existing  fabric  of  industry  is  built  upon  the 
confidence  of  the  commercial  world  in  endlessly  accumulating 
profits  and  dividends.  The  instant  when  that  confidence  is 
undermined  by  any  united  expression  whatever  of  the  will  of 
the  people  to  arrest  that  process,  this  whole  fabric  must  collapse 
as  a  unit. 

Such  an  event  would  be  merely  an  exact  parallel  with  the 
outburst  of  the  French  Eevolution,  or  of  our  own  Civil  War. 
The  former  was  precipitated  by  nothing  more  radical  than  a 
defiance  of  the  king's  authority  by  the  most  conservative  of 
France's  property-owners;  but  the  aristocrats  had  taken  care 
to  pile  up,  first,  a  magazine  of  high  explosive  in  the  form  of 
concealed  national  bankruptcy — exactly  what  the  commercial- 
ists  are  doing  here  to-day.  Hence,  and  for  this  reason  only, 
what  ensued  was  not  the  usual  incarceration  in  the  Bastille,  but 
revolution. 

As  to  the  Civil  War,  that  was  not  precipitated  by  the  aboli- 
tionists— as  must  have  been  the  case  if  the  believers  in  the 
psychological  control  of  history  by  will-power  be  right.  Nor 
did  it  come  to  pass  through  any  revolt  of  the  oppressed  from 
below,  as  must  have  been  the  case  if  the  socialists'  faith  in  a 
revolution  by  "general  strike"  had  any  foundation  in  human 


778  MODERN  ECONOMIC  TENDENCIES 

experience.  The  fizzle  of  the  revolution  of  1848  in  Europe, 
and  that  of  John  Brown's  raid  here  in  America,  in  1859,  prove 
that. 

No,  the  Civil  War  was  precipitated  by  the  mere  'election  of 
Lincoln,  on  a  platform  sworn  to  leave  slavery  untouched  where 
it  was  established — merely  to  prevent  its  territorial  expansion. 
Yet  within  a  month  from  that  election  South  Carolina,  with- 
out waiting  to  ascertain  what  would  be  Mr.  Lincoln's  policy 
when  in  the  White  House,  seceded.  The  fat  was  then  in  the 
fire,  and  civil  war  inevitable. 

During  the  winter  the  rest  of  the  Southern  States  followed 
South  Carolina.  In  April  Fort  Sumter  was  fired  upon.  In 
every  act  of  aggression  which  made  war  inevitable  the  slave- 
owners were  the  initiators.  And  as  soon  as  Sumter  had  fallen 
the  true  nature  of  slavery  fell  disclosed,  and  the  northerners 
who,  five  years  before,  had  mobbed  the  abolitionists  and  elected 
Buchanan,  marched  south  and  gave  up  their  lives  to  abolish 
slavery. 

History  does  repeat  itself.  It  is  those  who  to-day  are  mob- 
bing the  radicals — agitators  not  one  whit  more  narrow-minded, 
wrong  or  irritating  to  the  placid  than  were  the  abolitionists 
of  1856 — who,  five  years  hence,  will  follow  the  example  set 
them  by  the  electors  of  Buchanan.  They  will  give  up  their 
lives  in  abolishing  forever  that  commercial  system  the  inequi- 
ties of  which  are  the  source  of  all  radicalism. 

Education  the  Vital  Necessity. — For  all  these  reasons  edu- 
cational effort  is  your  only  outlet — and  it  is  the  most  important 
one.  For  the  greatest  misery  attendant  upon  revolutions  comes 
not  from  the  loss  of  the  autocracy,  the  collapse  of  which  brought 
it  on,  but  from  the  anarchy  following  as  a  sequel  thereto, 
because  of  a  public  opinion  entirely  unprepared  for  it,  in  the 
sense  of  knowing  the  higher  good  toward  which  destiny  was 
thereby  forcing  civilization  forward.  Your  aim  should  be  to  work, 
night  and  day,  to  prepare,  against  the  crash,  a  foundation  of 
wholesome,  responsible,  well  informed,  and  therefore  confident, 
public  opinion — to  replace  that  blind  and  chaotic,  and  therefore 
panicky  and  turbulent,  lack  of  any  coherent  sentiment  regard- 
ing social  evolution  which  our  universities  are  now  working 
so  diligently  to  bequeath  to  us. 

A  panic-stricken  person,  we  know,  is  irresponsible  for  his 
acts;  but  a  panic-stricken  people  is  far  worse.  It  becomes 


THE  PATH  BEFORE  US  779 

demoniac  in  its  blunderingly  cruel  efforts  at  self-preservation. 
The  worst  excesses  of  the  French  Revolution,  upon  examina- 
tion, become  plainly  due  not  to  malice,  but  to  fear.  Our  own 
most  shameful  periods  of  American  history — the  mobbing  of 
the  abolitionists  before  the  war,  and  the  "reconstruction"  of 
the  South  afterwards — were  both  due  merely  to  uninformed, 
unreasoning  social  fear. 

All  Minor  Reforms  Futile. — Immediate  economic  relief  is 
impossible.  Civilization  now  stands  entangled  in  an  economic 
quicksand.  Whatever  move  it  may  make  involves  it  only  more 
deeply  in  a  threatened  suffocation  by  commercialism — or  if  not 
that,  then  in  revolution  forced  upon  us  by  its  collapse. 

Only  attitudes  of  mind  can  be  altered  without  harm.  Noth- 
ing can  be  done  except  to  let  commercialism  expand  as  peace- 
ably as  it  will,  until  it  shall  have  exploded  beneath  its  own 
feet  the  magazine  of  inflated  credits  and  valuations  which  its 
own  fatuous  efforts  have  accumulated. 

For  its  own  "initiative,"  so  highly  prized,  has  arranged  both 
detonator  and  fuse.  The  trigger  is  slowly,  but  surely,  being 
cocked  by  the  unrestrained,  uncontrollable  elevation  of  prices 
— a  policy  which  the  businessman  seems  to  dream,  with  a 
naivete  beyond  comprehension,  can  be  continued  without 
penalty. 

Therefore  upon  all  classes  is  urged  quiescence  and  study,  but 
most  of  all — combination  as  Ultimate  Consumers.  Upon  this 
ground  all  classes  can  meet  without  jealousy,  friction  or  fear. 

To  the  working-classes  non-resistance  by  strike  is  seriously 
advised — not  because  you  do  not  deserve  more  life-support,  but 
because  you  cannot  get  it  that  way.  There  is  no  possibility 
that  this  advice  will  be  heeded  by  labor-organizations;  but  the 
floating  labor-sentiment,  which  looks  askance  at  both  trades- 
unionism  and  socialism,  yet  knows  not  what  to  do  to  make 
both  ends  meet,  may  accept  it. 

Let  the  commercialists  monopolize  that  bargaining  over 
wages  at  which  they  always  beat  you.  Combine,  instead,  as 
Ultimate  Consumers,  and  control  the  sole  source  of  all  their 
strength,  retail  prices. 

To  the  general  public,  exasperated  alike  by  the  public  service 
corporations  and  the  retail  dealers,  similar  study  and  com- 
bination is  advised.  Preach  everywhere  the  evils  of  commer- 


780  MODERN   ECONOMIC   TENDENCIES 

cialism,  but  do  not  advocate  attempts  at  its  elimination  by 
fractional  purchase  by  the  government. 

Do  not  expect  immediate  relief  from  any  source.  Expect 
%he  situation  to  get  steadily  worse  until  it  explodes.  But  preach 
everywhere  the  natural  sovereignty  of  the  Ultimate  Consumer 
to  step  in  and  rule  when  that  has  occurred.  Remind  everyone 
of  the  immeasurable  good  certain  to  result. 

Free  Speech  and  Economic  Reform. — Aside  from  these 
generalities,  however,  there  are  two  reforms  to  which  immedi- 
ate, active  attention  should  be  devoted.  These  reforms  are 
suggested  not  because  the  author  is  confident  of  their  prac- 
ticability, but  because,  if  some  active  reform  must  be  undertaken, 
these  surely  come  first. 

The  aim  of  these  suggestions  is  real  freedom  of  speech. 
If  social  reform  is  to  be  attained  otherwise  than  by  violence, 
certainly  the  fullest  freedom  of  public  debate  is  a  first  essential. 

Social  reform,  moreover,  is  an  unending,  continuous  process. 
If  we  are  ever  to  be  freed  from  this  endless  turbulence  of 
pent-up  discontent,  this  periodic  outburst  of  war  or  revolution, 
the  first  step  in  its  attainment  is  a  much  better  opportunity 
than  now  for  the  prompt,  wide  and  authoritative  advertisement 
of  all  grievances. 

Yet  by  this  the  author  is  not  urging  a  greater  laxity  of 
police-control  over  the  soap-box  orator  (although  a  greater 
constancy  of  policy  would  be  appreciated).  Nor  is  it  sought 
to  extend  immunity  to  the  pacifist  in  time  of  war,  however 
sincere  may  be  his  solicitude  for  humanity. 

As  for  the  soap-box,  that  is  not  worth  fighting  for.  Is  it 
not  too  paltry  a  medium  for  relieving  the  people's  feelings,  in 
the  light  of  modern  appliances  for  communication  with  the 
millions,  to  be  worth  a  fight?  Fight,  rather,  for  the  freedom 
of  our  real  means  for  intracommunication — the  college  and  the 
press ! 

As  for  pacifism,  any  wise  advocate  of  free  speech  will  recog- 
nize the  contrast  between  times  of  peace  and  those  of  war.  A 
declaration  of  war  stands  as  a  notice  to  the  world  that  the 
era  of  free  speech,  as  of  all  other  civic  rights,  is  temporarily 
at  an  end — because  free  speech  and  civic  rights  have  failed 
to  preserve  order  and  protect  the  state.  Force  must  supplant 
them  because  there  are  some  things — for  instance,  an  un- 
scrupulous use  of  force,  whether  from  within  or  from  foreign 


THE  PATH  BEFORE  US  781 

soil,  in  disregard  of  the  natural  laws  governing  human  asso- 
ciation— which  the  utmost  freedom  of  speech  is  incapable  of 
coercing. 

The  first  duty  of  the  reformer  is  to  recognize  the  fact  that 
an  imperfect  society  is  better  than  none  at  all.  A  mere  ac- 
cumulation of  people  is  very  far  from  being  a  society.  A  society 
consists  of  a  set  of  institutions — government,  laws,  etc.  When- 
ever these  are  invaded  the  'individual,  and  particularly  the 
millions  at  the  bottom,  suffer  miserably,  from  unemployment, 
famine,  disease,  violence,  etc. 

This  does  not  mean  that  wrong  institutions  should  be  ac- 
cepted in  servile  meekness.  It  does  mean  that  mere  defiance 
of  government,  because  one  is  troubled  by  a  wrong  institution, 
does  the  poor  more  harm  than  good. 

Wherever  these  institutions  may  be  bettered,  this  should  be 
done.  The  need  for  this  is  perennial.  Indeed,  we  have  no 
volition  in  the  matter.  Wrong  forces  us  to  right  itself,  against 
our  will.  And  freedom  of  speech  is  aimed  at  the  facilitation 
of  the  betterment  of  such  imperfections  in  social  organization. 

But  war  is  aimed  at  the  bare  preservation  of  whatever  sort 
of  a  state  may  happen  to  exist,  imperfect  as  it  may  be;  because 
nothing  brings  upon  all  classes  such  hideous  suffering  and  death 
as  the  complete  collapse  of  the  state.  Therefore  it  must  be 
preserved,  even  at  the  cost  of  many  individual  lives  and,  if 
necessary,  all  civic  rights. 

But  a  secondary  result  of  every  war  of  recent  centuries  has 
been  the  reform  of  some  major  fault  in  the  state — a  fault  so 
great  that  freedom  of  speech  had  been  unable  to  correct  it. 
Every  clause  of  our  existing  liberties  has  been  acquired  in  this 
way,  as  the  automatic  result  of  some  war  or  revolution.  Every 
superiority  of  America  over  other  countries  which  has  attracted 
millions  to  these  shores  has  been  won  by  a  fight. 

For  all  these  reasons,  the  duty  of  every  citizen,  when  once 
war  has  been  declared,  is  to  refrain  from  criticism  and  support 
the  government.  Then  is  no  time  to  effect  internal  reform. 
That  should  have  been  done  before. 

Real  Freedom  of  Speech. — But  what  is  intended  by  this 
present  call  for  freedom  of  speech  is  something  of  far  greater 
effectiveness  for  the  preservation  of  the  people's  rights,  and 
the  avoidance  of  war,  than  is  all  this  irresponsible,  unthinking 
criticism  by  the  soap-box  pacifists.  What  this  nation  most 


782  MODERN   ECONOMIC   TENDENCIES 

urgently  needs,  for  the  true  liberty  of  the  most  patriotic  and 
serious-minded,  is  the  freedom  of  printed  speech  in  the  press, 
and  academic  freedom  in  our  colleges.  For  without  these,  the 
two  natural  safety-valves  for  modern  intellectual  patriotism, 
to  relieve  and  advertise  wholesome  discontent  with  real  wrongs 
and  to  educate  innocent  ignorance,  frequent  social  crises  are 
inevitable. 

The  Freedom  of  the  Press. — As  for  freedom  of  speech  in 
the  press,  that  topic  was  begun  in  our  reference  to  modern 
advertising  under  the  sub-head  "Periodicals,"  in  Chapter 
XVIII.  We  condemned  there  the  perniciousness  of  allowing 
our  current  press  to  be  prostituted  to  commercialism,  as  now, 
by  its  reliance  upon  advertisers  rather  than  subscribers  for  its 
support. 

But  what  was  emphasized  at  that  point — the  swindling  of 
the  reader  when  he  buys  his  alleged  reading-matter,  and  again 
when  he  buys  the  thing  advertised — is,  after  all,  not  the  chief 
trouble,  although  it  is  bad  enough.  The  chief  detriment  to 
the  community  lies  in  the  fact  that  even  the  small  portion  of 
reading -matter  supplied  amidst  the  advertisements  is  not  free 
to  be  what  the  human  nature  of  either  editor  or  subscribers 
would  have  it;  it  must  be  what  pleases  the  advertisers. 

For  the  advertisers  now  pay  the  major  portion  of  the  cost 
of  producing  the  periodical,  with  its  profits  to  the  publisher. 
It  is  but  natural,  under  commercialism,  that  they  should  have 
the  right  to  dictate  its  editorial  policy.  They  possess  the  same 
dominance  over  the  subscribers  that  the  officers  and  stock- 
holders of  a  public-service  corporation  do  over  its  patrons. 

Indeed,  in  the  case  of  the  press  the  subscriber  comes  out 
third.  First  come  the  business-interests  of  the  advertiser,  then 
those  of  the  stockholders  in  the  publishing-corporation,  and 
lastly  the  merely  human  and  literary  preferences  of  editor  and 
subscriber. 

Because  of  this  artificial  distortion  of  the  natural  human 
relationships,  the  public  gets  from  the  press  to-day  no  more 
accurate  idea  as  to  its  own  literary  preferences  than  it  gets 
explanation  of  its  own  economic  anatomy  from  the  universities, 
nor  as  to  the  cost  of  its  food,  transportation,  etc.,  from  the 
dealers  in  those  things.  In  each  case  propaganda  acceptable 
to  the  money-making  powers  is  doled  out  to  the  American 
public  exactly  as  the  Hohenzollerns  educated  the  German  people 


THE   PATH   BEFORE   US  783 

— to  suit  themselves.  We  have  yet  to  learn,  through  bitter 
experience,  that  we  are  now  as  completely  deceived  as  to  our 
economic  rights,  liberties  and  responsibilities  as  the  German 
people  have  been  as  to  their  political  ones. 

Nor  has  size  or  monopoly  anything  to  do  with  this.  Just  as, 
in  Germany,  the  pettiest  puppet  of  titled  militarism  may  lord 
it  brutally  over  the  most  respectable  commoner,  so  in  America, 
any  successful  sausage-maker,  if  he  but  have  money  with  which 
to  advertise,  may  dictate  to  our  ablest  journalists  and  our  most 
literary  subscribers  just  what  they  shall  print  and  read.  He 
actually  does  this  all  the  time.  Nothing  adverse  to  commer- 
cialism may  be  printed. 

As  to  belle  lettres,  the  sausage-maker  of  course  knows 
nothing,  nor  cares  to  act  directly.  But  indirectly  the  com- 
mercial system  for  which  he  stands,  by  its  maldistribution  of 
purchasing-power,  forces  into  power  and  prominence  those 
nauseating  "best  sellers"  of  fiction  which  melt  into  obscurity 
within  six  months,  and  those  disgusting  "comic  sups."  of  our 
daily  press,  against  every  preference  upon  the  part  of  the 
literary  world.  How  this  is  done  was  explained  under  "charg- 
ing all  which  the  art  will  bear." 

Advertisements  Mixed  with  Reading-matter. — Of  all  these 
lapses  from  good  taste  and  public  dignity  involved  in  journal- 
ism under  commercialism,  none  is  worse  than  the  deliberate 
intermixture  of  reading  and  advertising-matter  upon  the  same 
page.  This  is  done  solely  in  order  to  thrust  the  latter  so 
impertinently  into  the  face  of  the  reader,  as  candy  is  tossed 
into  our  laps  in  railway-cars,  as  to  increase  his  likelihood  of 
buying  that  for  which  he  has  no  natural  desire. 

The  editor  or  publisher  who  would  ostracize  a  fellow  club- 
member  for  erecting  a  bill-board  beside  the  club-links,  to 
advertise  his  wares,  or  who  affects  scorn  of  "yellow"  journalism, 
yet  who,  solely  for  the  sake  of  profits,  degrades  his  own  sheet 
to  the  extent  of  intermingling  "ads."  with  news,  has  furnished 
as  fine  an  instance  of  deep-seated  inconsistency  and  bribed 
hypocrisy  as  may  well  be  found.  He  should  be  black-balled 
from  every  professional  society  and  every  social  club. 

It  is  not  expected  here  that  any  individual  editor  is  capable 
of  reforming  this  hideous  practice  alone.  But  the  least  he 
can  do,  in  professional  self-respect,  is  to  denounce  the  thing, 
in  his  unofficial  moments,  in  the  severest  terms  which  his  pen 


784  MODERN  ECONOMIC  TENDENCIES 

can  command.  It  is  mere  sins  of  omission  such  as  this  which 
have  brought  on  every  past  revolution. 

For  if  there  be  any  one  department  of  modern  life  in  which 
the  smirching,  deforming  hand  of  commercialism  is  more  ob- 
vious than  in  any  other,  it  is  journalism.  If  there  be  any 
defect  in  journalism  so  great  as  to  hide  all  others,  for  the 
time,  it  is  that  due  to  its  being  conducted  primarily  for  the 
purpose  of  pleasing  its  advertisers,  and  secondarily  for  the 
profits  of  its  stockholders. 

The  natural  news-sheet — soon  to  be  introduced,  we  hope,  as 
a  first  step  toward  a  national  factory-system — will  publish  no 
advertisements  at  all,  mixed  with  reading-matter.  It  will  be  a 
pure  distributer  of  news  or  entertainment.  It  will  be  a  mo- 
nopoly. It  will  be  recognized  as  a  public  service  as  important 
to  be  kept  from  the  taints  of  duplication  and  profit-making 
as  a  fire-department,  or  a  water-supply,  or  an  army. 

Then,  instead  of  there  being,  as  now,  a  half-dozen  inde- 
pendent publications  between  which  choice  must  be  made  each 
morning — each  publishing  its  own  version  of  all  the  several 
sorts  of  news,  in  virtual  duplication  of  all  the  others — the 
single,  salaried,  non-owned  journal  of  the  near  future,  a 
monopoly  for  its  own  community,  will  be  published  in  a  half 
a  dozen  or  more  separate  sections,  each  section  specializing 
upon  some  one  line  of  news,  and  containing  no  advertisements. 
One  section  will  be  devoted  to  American  politics,  another  to 
foreign  news,  a  third  to  sports,  etc.  Indeed,  one  section  may 
be  a  "Headline  Section,"  containing  a  brief  abstract  of  each 
of  the  others. 

In  any  event,  each  reader  will  buy  only  those  sections  which 
he  desires.  When  he  pays  for  it  he  will  not  pay,  as  now,  for 
several  sections  which  he  does  not  read,  and,  in  addition,  for 
the  duplications  of  all  those  sections  in  the  journals  which, 
he  does  not  luy. 

For  at  present  the  cost  of  all  is  charged  against  the  com- 
munity, in  effect,  as  a  lump  sum.  If  each  journal  enjoys,  as 
now,  only  one-sixth,  say,  of  the  total  circulation,  it  must 
charge  a  much  higher  price  than  if  it  were  a  monopoly.  As 
in  grocery-stores  or  elsewhere,  so  in  journalism,  the  Consumer 
must  learn  that,  under  commercialism,  he  pays  for  duplicated 
effort  which  he  neither  demands  nor  enjoys,  far  more  than  he 
does  for  all  which  he  actually  consumes. 


THE  PATH  BEFORE  US  785 

As  to  advertising,  one  of  these  sections  of  the  future  daily 
journal  will  be  devoted  to  the  announcement  of  real  novelties, 
of  aid  and  interest  to  the  Consumer  in  his  daily  purchases.  But 
these  announcements  will  be  far  different  from  present  ad- 
vertisements. They  will  exhibit  these  following  distinctive  con- 
trasts therewith,  namely: 

(1)  Only  things  which  are  actually  novel  will  be  announced. 

(2)  Each  novelty  will  be  appraised  as  to  its  quality  relatively 
to  older  goods,  when  announced,  by  impartial,  publicly  salaried 
experts. 

This  we  now  have,  to  a  slight  degree,  in  the  news-columns 
of  existing  journals.  But  now  it  is  vitiated  away  from  purity 
of  service  to  the  community  by  two  factors:  first,  the  tempta- 
tion to  be  liberal  as  to  "news"  concerning  a  thing  which  is 
advertised  liberally  in  the  paid  columns,  even  if  it  possesses 
no  novelty  or  value;  and  secondly,  the  danger  of  litigation 
in  case  a  poor  article  is  promulgated  as  such.  In  the  journal 
of  the  future  both  of  these  vitiants  will  be  automatically 
eliminated,  by  the  mere  absence  of  profits  or  dividends. 

In  addition  to  the  various  news-sections  mentioned  above, 
the  ideal  journal  must  also  include  (until  commercialism  may 
have  been  abolished  completely)  an  advertising-section — or 
possibly  several  of  them,  each  devoted  to  a  specialty,  such  as 
"board  and  rooms,"  "employment,"  etc.  But  these  advertising- 
sections  will  burden  the  reader  only  if  he  buys  them,  for  they 
will  be  distributed  only  for  cash.  The  cost  of  their  publication 
should  be  divided  between  advertiser  and  reader. 

The  burden  upon  the  Consumer  due  to  these  advertising- 
sections  will  be  reduced  from  present  standards  not  merely  by 
their  distribution  only  to  those  who  desire  them,  but,  even 
when  in  such  hands,  by  their  following  features.  The  "dis- 
play" of  all  announcements  will  be  that  of  the  greatest  help 
to  the  reader-consumer  and  the  best  economy  of  his  money. 
Space  will  not  be  wasted.  Partiality  in  prominence  will  be 
avoided.  An  entire  page  will  never  be  devoted,  at  great  ex- 
pense, as  now,  to  shouting  about  some  matter  scarcely  deserving 
an  inconspicuous  paragraph,  just  because  someone  can  increase 
his  private  profits  by  incurring  temporarily  the  cost  thereof, 
and  then  collecting  it  from  the  helpless  Consumer.  Clarity, 
brevity  and  instructiveness  will  be  sought,  and  repetition 
avoided. 


786  MODERN   ECONOMIC   TENDENCIES 

Present  advertising  studiously  avoids  all  these  aims.  Above 
all  else,  endless  repetition  of  meaningless  names  is  its  most 
cherished  habit. 

It  is  obvious  that  an  advertising-sheet  thus  limited  would 
restrict  our  most  cherished  American  license,  namely,  to  fight 
noisily  over  the  Consumer's  money  at  the  expense  of  the  Con- 
sumer, who  "gets  it  coming  and  going/5  He  must  both  furnish 
the  spoils  and  pay  for  the  cost  of  the  fight.  But  this  restriction 
must  form  the  keynote  of  any  adequate  program  of  economic 
reform* 

As  to  the  relative  cost  to  the  public  of  present  journalism 
and  that  proposed,  two  facts  must  always  be  remembered  in 
connection  with  the  existing  plan,  namely: 

(1)  Whereas  the  reader  to-day  pays  only  a  third,  or  perhaps 
a  quarter,  of  the  commercial  cost  of  his  paper  when  he  buys 
it,  he  pays  the  rest  when  he  buys  across  the  shop-counters  of 
those  who  advertise  therein,  or  anywhere  else.     In  the  future 
the    Consumer   will   pay   far  less   when   he   buys   any   of   the 
myriad    of    things    which    are    now    advertised    in    our    daily 
journals,  and  when  he  buys  the  latter  he  will  pay  only  the 
natural,  as  contrasted  with  the  commercial,  cost  thereof. 

(2)  The  money  now  spent  for  daily  papers  actually  pays, 
even  at  commercial  prices,  for  a  lot  of  things  which  the  reader 
does  not  want.     In  the  future  he  will  not  have  to  buy  pages 
of  announcements  of  cooks,  chauffeurs  and  stenographers  want- 
ing   situations,   when   he    needs    neither    cook,    chauffeur    nor 
stenographer;  nor  of  sporting-records  when  he  takes  no  in- 
terest in  sports;  nor  of  stock  quotations  when  he  never  dabbles 
in  stocks;  nor  of  emblazoned  reminders  of  various  brands  of 
beer,  soap,  medicines  or  lawn-mowers  when  all  that  he  desires 
is  the  latest  news  as  to  European  war  or  American  politics, 
or  the  marine  news  of  the  day.     Not  to  mention  the  labor 
wasted  in  printing  all  this  unwanted   stuff,  it  is  incidentally 
creating  a  famine  in  paper  and  devastating  our  spruce-forests 
by   our   waste   of  over   nine-tenths   of   the   paper  which   now 
reaches  our  hands. 

In  the  future,  what  the  Consumer  wants  as  to  news  he 
will  pay  for,  when  he  buys  news  and  not  when  he  buys  dry- 
goods  or  hires  a  cook;  and  news  he  will  get,  in  a  purity  far 
above  anything  possible  under  the  present  conduct  of  journal- 
ism primarily  for  the  pecuniary  profit  of  stockholders  and  ad- 


THE    PATH    BEFORE    US  787 

vertisers.  So  far  as  one  may  surmise,  the  average  reader  of 
the  future  daily  need  not  pay  more  than  one  cent  for  the 
six  weekdays,  with  another  cent  on  Sunday,  as  his  subscrip- 
tion for  all  the  sections  usually  desired  by  any  one  person. 
Yet  he  will  simultaneously  be  paying  less  than  now  for  all  the 
shop-goods  now  advertised  so  liberally  at  his  expense. 

On  the  other  hand,  as  to  editorials,  there  is  no  reason  for 
the  present  narrow  restriction  of  editorial  views,  and  for  the 
linking  of  news  and  editorial  policies  together.  For  this  forces 
each  reader  either  to  support  an  editorial  policy  which  he  dis- 
likes in  order  to  secure  good  news,  or  else  to  content  himself 
with  a  poor  supply  of  news  in  order  to  patronize  editorials  of 
which  he  approves. 

Among  the  several  sections  of  the  future  daily  journal  there 
will  naturally  be  one  devoted  to  a  review  of  current  events — 
somewhat  editorial  in  character,  but  carefully  impartial,  im- 
personal and  quotational  in  language.  This  will  be  edited 
by  salaried  men,  having  no  clientele  of  advertisers  behind  them. 
They  need  not  be  expected  to  display  especial  personal  original- 
ity. Indeed,  this  section  will  be  a  news-sheet  as  to  the  views 
of  others,  rather  than  a  purely  individual  fountain  of  ethics. 

But  supplementing  this — feeding  it,  in  fact — there  should 
be  several  independent  editorial  sheets,  each  published  and  dis- 
tributed by  the  community- journal,  but  each  displaying  the 
views  of  some  stated  individual  or  society.  There  may  be  as 
many  of  these  as  the  people  will  support,  the  only  condition 
attached  to  their  publication  being  that  the  natural  cost  thereof 
must  be  voluntarily  supplied  by  the  reader.  In  addition,  for 
those  writers  not  able  nor  desirous  of  making  so  regular  a 
vocation  of  the  task  of  self-expression,  space  should  be  ac- 
corded at  cost  in  the  community's  "Section  of  Contributed 
Letters." 

The  Modern  Town-Meeting. — For  the  people  direly  need 
a  printed  forum.  There  is  grave  and  growing  pressure  for  a 
freer  multiplicity  of  personal  views  upon  public  questions.  The 
day  when  the  individual  voice,  speaking  from  the  steps  of  the 
village-grocery  or  in  town-meeting,  formed  an  adequate  means 
for  the  publication  of  personal  views,  is  far,  far  behind  us. 

Yet  the  modern  news-editorial  has  not  taken  the  place  of 
these.  It  reaches  the  people  in  vast  numbers,  it  is  true;  but 


788  MODERN   ECONOMIC   TENDENCIES 

it  is  no  longer  either  personal  or  unbiased,  nor  sufficiently 
multiple,  as  to  source. 

The  views  now  appearing  as  editorials  in  our  daily  journals 
are  very  far  indeed  from  representing  the  frank,  personal  views 
of  individual  minds,  such  as  built  up  our  best  traditions  of 
journalism  in  the  past.  Each  sheet  to-day  maintains  an  editorial 
policy  which  is  as  cold-blooded  a  matter  of  design,  on  the  part 
of  a  staff  in  "great  headquarters,"  as  is  Prussian  militarism. 
This  is  not  saying  that  it  is  equally  cruel,  but  that  it  is  equally 
impersonal.  Every  man  must  abandon  his  personal  views  when 
he  enters  editorial  offices,  quite  as  when  he  enlists  in  the  army. 

For  instance,  the  author  knows  of  a  wager  won  by  the  city- 
editor  of  one  of  New  York's  more  conservative  dailies,  a  few 
years  ago,  to  the  effect  that  twenty  men  could  be  found  on 
staff-positions  upon  his  own  and  similar  papers,  all  of  whom 
were  socialists  in  the  broader  sense  of  the  term.  Yet  not  one 
of  these  sheets  ever  dared  to  print  a  single  editorial  paragraph 
favorable  to  socialism. 

That  is  what  is  meant  by  the  frequent  complaint  of  the 
"ownership"  of  the  press  by  certain  "interests."  It  is  not  that 
the  editors  accept  literal  bribes  to  silence.  There  is  no  need 
to  offer  bribes.  They  come  cheaper  than  that.  So  long  as  a 
large  fraction  of  the  paper's  income  is  paid  by  advertisers, 
every  dollar  of  editorial  salary  is  in  reality  a  continuous  bribe. 
To  disobey  orders  from  those  who  pay  means  losing  one's  job. 

Yet  all  that  is  needed,  in  order  to  reform  all  this,  is  public 
recognition  of  the  fact  that  those  who  pay  are  not  the  ad- 
vertisers themselves,  but  the  Consumers  who  buy  from  the 
advertisers,  and  the  reorganization  of  our  industries  upon  that 
basic  fact. 

Rapid-Transit  Journalism.— A  natural  branch  of  any  such 
a  monopolized,  community-owned  journalism  as  has  been  sug- 
gested, working  out  easily  in  connection  with  publicly  owned, 
non-ticket-chopping  transit-facilities,  would  be  the  publication 
of  the  news  of  the  hour  upon  cards  replacing  the  silly  advertise- 
ments which  now  stare  us  in  the  face  as  we  ride  to  and  fro. 
The  work  of  changing  these  cards  hourly  would  be  as  nothing 
compared  with  the  publication  of  hourly  editions  of  a  half- 
dozen  duplicative  newspapers,  as  now,  and  their  distribution 
to  hundreds  of  competing  news-stands;  while  the  public  would 
be  vastly  better  informed,  with  great  economy  in  time. 


THE  PATH  BEFORE  US  789 

The  present  subway  and  elevated  system  in  New  York  City 
could  be  cared  for  by  not  over  a  half-dozen  card-changing 
stations,  with  perhaps  two  score  more  for  the  surface-lines. 
What  novel  and  ingenious  devices  for  the  frequent  adjustment 
of  these  news-cards,  or  what  optical  substitutes  for  cards,  might 
be  invented,  as  soon  as  the  demand  for  them  was  released,  may 
be  judged  from  the  marvelous  creation  of  accessories  following 
the  public  adoption  of  telephones,  automobiles,  "movies,"  air- 
planes or  wireless  telegraphy. 

The  task  of  keeping  our  hurriedly  moving  urban  public  con- 
stantly educated  as  to  the  latest  news,  both  political  and  scien- 
tific, is  one  of  the  problems  now  pressing  most  urgently  for 
a  solution.  It  is  our  adults,  at  present,  who  need  education 
far  more  than  our  youth.  We  strain  grotesquely,  in  our  boards  of 
education,  at  the  simple  task  of  imparting  to  minors  elementary 
facts  regarding  which  there  is  virtually  no  debate,  while  neglect- 
ing placidly  that  far  more  serious  and  intricate  problem  of  how 
to  teach  to  that  most  dangerous  of  all  high  explosives  known 
to  man — modern  congested  populations  of  adults — a  self- 
knowledge  sufficiently  accurate  and  incisive  to  preserve  it  from 
periodic  social  self-destruction. 

To  the  performance  of  this  patriotic  task  there  lies  in  the 
way  no  obstacle  which  is  comparable  with  that  institution  which 
boasts  so  proudly  that  it  itself  performs  this  service,  namely, 
commercial  advertising.  For  it  absorbs  unto  itself  all  manner 
of  moneys,  facilities  and  opportunities  for  teaching  the  people, 
yet  educates  them  not  one  whit — except  negatively.  Of  the 
many  sorts  of  loss  due  to  commercialism  which  evade  our 
statistical  nets,  this  educational  loss  must  class  as  one  of  the 
most  important. 

For  the  fact  of  far  greater  import  than  this  passive  loss  of 
wasted  effort  is  that  the  advertising  power  of  the  land  stands 
as  a  strict  and  abominally  one-sided  censor  of  our  press.  It 
permits  only  opinions  favorable  to  commercialism  to  reach  the 
people.  It  designedly  confuses  attacks  against  the  commercial 
system  with  attack  against  the  political  government,  whereas 
true  loyalty  to  the  political  government  demands  immediate 
attack  upon  the  commercial  system,  as  our  worst  enemy  of 
political  liberty  and  stability. 

It  continually  dares  even  to  suppress  facts.  Indeed,  the  ideas 
set  forth  in  this  book  seem  radical  and  surprising  only  because 


790  MODERN   ECONOMIC   TENDENCIES 

the  people  have  been  systematically  blinded  for  decades  by  our 
press  and  our  colleges,  both  of  them  harnessed  and  driven  by 
commercial  influences.1 

The  obviously  rapid  expansion  of  periodical  publications  in 
recent  years  has  been  promoted  primarily  as  a  means  for  dis- 
tributing advertisements,  while  disguising  to  the  Consumer  the 
fact  that  he  pays  for  them.  This  flood  of  cheap  publications 
has  come  into  existence  in  search  of  a  share  of  the  spoils  to  be 
won  in  advertising,  and  not  at  all  in  response  to  any  natural 
popular  demand  for  reading-matter — just  as  additional  grocery- 
stores  are  being  intruded  where  there  are  already  too  many. 
Their  offerings  of  literature  have  been  sagged  by  commercialism, 
both  in  quantity  per  cover  and  in  literary  quality,  to  the  very 
lowest  degree  compatible  with  the  maintenance  of  a  circula- 
tion big  enough  to  give  valuation  to  their  advertising-space. 
They  secure  this  circulation  only  because,  in  the  first  place, 

iThis  influence  is  as  intangible  as  it  is  unquestionable.  In  regard 
to  the  Russian  situation,  for  instance,  the  author  has  been  corroborated 
by  the  spontaneous  complaints  of  other  educated,  impartial  men,  in  his 
view  that  we  have  been  systematically  deceived  as  to  the  facts  by  our 
conservative  daily  press.  Yet  it  is  an  omission,  not  an  act,  which  is 
to  be  condemned. 

For  another  instance,  the  New  York  Times,  perhaps  America's  most 
high  esteemed  news-sheet,  yet  a  protagonist  of  commercialism,  publishes 
on  July  10,  1919,  the  news  of  New  York  State's  prosecution  of  the 
Band  School  on  the  first  page,  with  prominent  headlines.  On  the 
18th  page  it  records  the  federal  government's  procedure  against  sixty- 
four  "prominent"  citizens  of  Arizona,  largely  mine-owners,  for  the 
alleged  kidnapping,  in  1917,  of  several  hundred  striking  miners  and 
their  deportation  from  the  State.  On  the  28th  page  it  reports  the 
conviction  and  jail-sentence  of  seventeen  Massachusetts  fish-dealers,  for 
conspiracy  in  raising  prices. 

This  book  has  already  condemned  the  doctrines  of  the  Eand  School 
in  terms  as  severe  as  it  can  command,  in  language  written  some  two 
years  before  the  government's  discovery  that  the  Rand  School  was 
dangerous.  But  it  regards  such  offenses  of  commercialism  as  those 
reported  in  Arizona  and  Massachusetts  as  far  worse,  because  they  are 
the  responsible  creators  of  the  Eand  school  of  discontent.  Therefore 
they  should  receive  front-page  displays. 

Further,  it  regards  the  one-sided,  arbitrary  policy  of  the  various 
sheets  favoring  commercialism,  in  obscuring  the  issue  by  minimizing 
one  side  and  magnifying  the  other,  as  worthy  to  be  held  up  to  public 
scorn  as  the  most  responsible  and  dangerous  of  all,  because  it  prevents 
public  opinion  from  protecting  itself  in  the  ways  in  which  it  easily 
could,  were  it  informed  as  to  the  truth,  by  supplying  adequate  remedy 
before  an  explosion  had  become  inevitable. 


THE  PATH  BEFORE  US  791 

commercialism  has  diverted  undue  purchasing-power  into  pockets 
not  equipped  with  literary  taste,  in  the  second  place  by  creating 
an  artificial  pressure  for  sensational  fiction  as  a  distraction  from 
the  fatigues  of  commercial  combat,  and,  in  the  third  place,  by 
systematically  deceiving  the  people  as  to  the  true  price,  place 
and  time  of  payment  for  this  reading-matter. 

Self-supporting,  Self-respecting  Advertising. — The  com- 
plete divorce  of  news-publishing  from  commercial  advertising 
must  be  accomplished.  To  do  this  the  printing  or  mailing  of 
advertising-matter  under  the  same  cover  with  reading-matter, 
or  the  collection  of  a  single  price  for  intermingled  reading 
and  advertising  matter,  or  the  selling  of  advertising-matter  for 
more  or  less  than  the  natural  cost,  must  all  be  forbidden.  The 
effect  of  the  law  must  be  that,  although  the  advertiser  may  hire 
a  printer  to  publish  advertising-matter  for  him,  Tie  must  then 
collect  from  the  person  desiring  the  advertisement  the  full  cost 
thereof,  but  no  more. 

In  other  words,  the  present  policy  of  sometimes  giving  the 
advertisements  away  for  nothing — as  is  always  the  case  when 
it  is  thrust  upon  the  Consumer,  directly  and  consciously,  sepa- 
rately from  reading-matter — and  of  sometimes  selling  it  to  the 
Consumer  under  a  cover  the  title  of  which  promises  reading- 
matter,  and  even  then  at  a  price  considerably  above  its  natural 
cost — which  price  is  collected  from  the  Consumer  at  various 
concealed  times  and  places — is  condemned  in  all  its  aspects.  If 
the  printer  is  to  continue  to  act  as  the  agent  for  the  advertiser 
in  collecting  its  cost  from  the  (Consumer,  as  now,  he  must  be 
placed  upon  a  cost-plus-salary  basis,  like  any  other  public  tax- 
gatherer,  and  no  longer  allowed  to  work  for  unknown  profits. 

Or,  if  the  advertiser  pays  off  the  printer  and  then  collects 
the  cost  of  his  advertising  from  his  own  Consumers  himself, 
he  must  do  so  openly  and  above-board,  instead  of  concealing 
this  cost  in  the  price  of  his  goods.  The  Consumer  of  adver- 
tising, as  of  any  other  commodity,  must  know  what  he  is  getting, 
when  he  gets  it,  and  what  he  is  paying  for.  Whether  he 
spends  his  money  for  literary  amusement,  for  information  as 
to  markets,  or  for  dry-goods  themselves,  he  must  be  required 
to  pay  for  only  what  he  gets,  when  he  gets  it. 

Names. — There  are  many  good  people  who  become  righteously 
indignant  over  any  radical's  references  to  commercialism  as 
"robbery."  Yet  in  reality  the  term  is  a  mild  one.  For  in 


792  MODERN   ECONOMIC   TENDENCIES 

robbery  the  victim  is  usually  allowed  to  know  that  he  is  being 
robbed.  The  abstraction  is  accomplished  by  a  force  which  is 
honestly,  if  brutally,  frank. 

But  in  commercialism,  in  contrast,  the  money  is  abstracted 
ju&t  as  purely  by  force,  yet  the  abstractor  is  a  cowardly  sneak. 
He  uses  every  sort  of  indirectness  and  evasion  which  human 
ingenuity  can  invent,  in  order  to  conceal  from  the  Consumer 
exactly  what  is  being  given,  as  to  costs,  for  a  certain  price 
exacted.  He  collects  his  money  at  any  time,  place  or  manner 
which  will  conceal  the  fact  that  it  is  coming  to  him.  He  always 
claims  innocence  of  any  intent  to  do  wrong — in  which  he  is 
usually  sincere — and  then  takes  all  the  starch  out  of  the  claim 
by  his  habitual  and  carefully  cultivated  secrecy  concerning  costs, 
and  indirectness  as  to  times  and  places  of  payment. 

Complete  Reform  of  the  Press. — If  it  were  possible  to  go 
a  step  further  than  the  above  program  and  make  the  entire 
periodical  press  a  single  monopoly  for  each  city  or  state,  or 
perhaps  for  the  nation,  far  greater  advantages  would  ensue. 
For  the  public  ownership  of  the  press  has  arguments  in  its 
favor,  lying  in  the  field  of  ethics  rather  than  of  economics, 
which  do  not  apply  to  street-railways,  or  even  to  food-stores. 
But  this  suggestion  as  to  public  ownership  must  not  be  confused 
with  the  far  more  basic  doctrine  that  both  reading -matter  and 
advertisements  must  be  sold  to  the  Consumer,  as  such — and  to 
that  end  must  be  published  separately. 

The  Universities. — As  to  the  universities,  our  present  lack 
of  academic  freedom  need  not  be  proven  here.  It  is  too  well 
recognized  by  all  thinking  people.  Argument  against  its  ex- 
istence degenerates  into  quibble.  The  sole  question  is :  Whence 
does  it  arise? 

Investigation  discloses  the  fact  that  its  source  lies  hidden 
in  a  most  peculiar  tradition — a  tradition  with  which  we  have 
now  become  so  familiar  that  we  have  forgotten  to  question  it. 
This  tradition  runs  to  the  effect  that  education  must  always 
be  furnished  at  less  than  its  natural  cost. 

It  is  proper  to  call  this  tradition  peculiar,  because  it  is  the 
exact  reverse  of  that  which  is  now  universal  in  the  supply  of 
all  things  other  than  education.  Whereas  the  price  asked  for 
education  is  always  less  than  its  cost,  that  asked  for  every  other 
service  or  commodity  is  more  than  its  natural  cost. 

Even  in  the  college-town  itself,  whatever  the  student  may 


THE   PATH   BEFORE   US  793 

buy  outside  the  college  costs  him  far  more  than  it  should.  In 
his  own  home-town  and  on  his  way  to  college  this  rule  is  uni- 
versal. But  when  he  has  once  entered  the  college,  everything 
bought  inside  costs  him  far  less  than  it  should. 

The  origin  of  this  peculiar  policy  of  the  colleges  lay  in  a 
most  commendable  desire  to  make  education  more  accessible 
to  the  poor.  But  its  real  result,  it  now  appears,  has  been  to 
make  a  good  education  unattainable  by  anyone,  rich  or  poor. 

For  these  two  diametrically  opposite  policies — of  charging 
either  more  or  less  than  the  natural  cost — are  equally  mistaken 
ones.  They  are  alike  in  their  short-sightedness.  For  it  is  the 
universal  commercial  policy  of  charging,  not  merely  more  than 
the  natural  cost,  but  all  which  the  traffic  will  bear,  which 
results  not  merely  in  a  constant  crop  of  young  men  too  poor 
to  afford  the  time  for  an  education,  even  if  given  for  nothing, 
but  in  an  abnormally  high  cost  of  everything  used  by  both 
college  and  teachers. 

On  the  other  hand,  the  collegiate  policy  of  charging  less  than 
cost  for  the  education  results  in  the  education's  being  far  in- 
ferior to  what  it  should  have  been,  when  finally  secured  by 
the  student's  toil  and  self-denial.  For  it  then  develops  that 
the  college  has  been  paralyzed  intellectually  by  its  policy  of 
unthrift. 

The  fact  that  the  education  is  given  for  less  than  cost  im- 
mediately makes  of  every  university,  whether  endowed  or  sup- 
ported on  appropriations  procured  through  politics,  a  slavish 
dependent  upon  outside  wealth  or  political  favor  for  support. 
Consequently  it  develops  always  a  slave's  timidity  and  a  slave's 
inefficiency.  An  institution  which  should  possess  the  utmost 
dignity  of  independence,  because  the  leader  of  public  opinion, 
has  been  by  this  mistaken  policy  artificially  reduced  to  the 
obsequiousness  of  a  poor  relation. 

Current  expenses  can  be  met  only  by  income  from  an  in- 
terest-bearing endowment.  Extensions  can  be  made  only  from 
donations  by  the  rich.  Therefore  any  scientific  attack,  however 
Christian  in  spirit,  upon  either  unusual  wealth  or  upon  interest, 
as  institutions,  immediately  becomes  "verboten." 

Hence  every  college-president  is  forced  to  descend  from  his 
natural  dignity — properly  superior  to  that  of  our  highest  legis- 
lative offices — to  become  half  a  beggar  for  funds,  and  half  a 
promoter  and  advertiser.  He  has  to  be  (above  all  things 


794  MODERN   ECONOMIC   TENDENCIES 

scholarly)  a  successful  beggar  and  sycophant.  He  must  cater 
to  the  interests  and  prejudices  of  the  rich,  or  else  lose  his  job. 

Corruption  need  not  be  even  suggested.  It  is  bad  enough 
that  an  office  which  ought  to  carry  with  it  the  highest  ideals 
of  intellectual  strength  and  fearlessness,  of  devotion  to  the 
progress  of  civilization  in  its  most  penetrative  sense,  of  broad 
faith  in  all  humanity,  of  altruistic  example  to  the  young,  of 
nobility  of  personal  character,  and  of  courageous  independence 
of  all  criticism  or  influence — an  office  which  should  be  accorded 
jealously  a  dignity  exceeding  even  that  of  the  Supreme  Court 
of  the  United  States — should  be  prostituted  to  the  servile  task 
of  securing  funds. 

Look  at  our  college-presidents,  as  a  class!  Where  do  they 
stand  in  public  influence?  Many  of  them  are  no  doubt  making 
heroic  effort  to  be  heroic  in  a  slave's  shackles.  Their  sins  are 
those  of  omission,  rather  than  of  commission.  It  is  what  they 
are  not  which  is  the  nation's  tragedy. 

Because  of  limited  funds  and  of  prejudices  higher  up,  the 
college-president  must  always  be  a  bulldozer  of  professors. 
Hence  his  faculty  must  always  be  pervaded  by  an  atmosphere 
of  servility  mixed  with  petty  politics.  He  himself  remains, 
only  upon  a  larger  scale,  purely  the  genus  despot,  species  politi- 
cian, variety  college-president. 

In  consequence,  the  entire  atmosphere  normal  to  the  faculty- 
room  has  been  degraded  from  that  of  free  and  proud  intel- 
lectual leaders  among  men  to  the  timid  subservience  of  a  gang 
of  half-fed  slaves.  Under  these  conditions  it  is  inevitable  that 
college-professors  should  be  publicly  accepted  as  belonging  to 
that  class  of  semi-fossils  which  will  accept  the  low  grade  of 
pay  and  limited  autonomy  now  characteristic  of  their  position 
— intellectual  pussy-footers,  in  constant  fear  of  the  trustees, 
of  the  president  and  of  themselves. 

To-day,  as  at  every  past  period  of  crisis,  all  the  able  and 
courageous  thinkers  have  been  squeezed  out  of  the  universities. 
The  few  content  to  remain,  who  have  eyes  with  which  to  see, 
have  been  harnessed  with  blinders. 

All  this  is  not  merely  shameful.  It  is  menacing  to  the 
nation.  It  is  sending  out  into  the  world  each  year  a  crop  of 
young  men  and  women,  naturally  imbued  with  the  energy  and 
ideals  of  youth,  but  with  both  of  these  features  stunted  and 
perverted  by  their  contact  with  that  petty,  sordid  atmosphere. 


THE  PATH   BEFORE   US  795 

The  natural  dignity  of  youth  has  been  disappointed  by  find- 
ing puppets  set  up  to  be  its  leaders.  Its  faith  in  human  nature 
has  been  degraded  by  contamination  with  faculty-politics.  Its 
hunger  for  clear  vision  into  life's  problems  has  been  dulled  by 
a  diet  of  intellectual  pastry — a  larded  mass  of  minutiae,  rather 
than  inspiring  wisdom — washed  down  by  artificial  stimulants 
to  unnatural  effort.  It  acquires  therefrom  the  shrewdness  of 
the  mental  guttersnipe,  rather  than  the  dignity  of  wisdom. 

There  is  no  finer  culture  than  this  in  which  to  breed  the 
germs  of  later  misunderstanding,  disappointment,  bitterness 
and  revolt — for  it  is  not  in  the  lower  classes  alone  that  these 
are  found — than  the  complacent,  dogmatic,  inadequate  self- 
sufficiency  which  now  pervades  our  college-graduates.  It  is 
based  upon  a  misconception  of  an  undigested  mass  of  minute 
facts,  upon  a  complete  lack  of  broad  insight  into  the  world 
as  it  is,  which  is  far  more  bigoted  and  dangerous  than  sheer 
ignorance. 

For  this  error  in  our  policy  of  charging  less  than  cost  for 
education  has  bred  in  our  universities  an  academic  philosophy 
and  practice  which  is  quite  a  parallel  with  that  of  commercial- 
ism outside.  Immediate,  visible  returns  are  worshiped.  Ulti- 
mate scholarly  attainment  is  decried.  The  whole  university- 
system  has  been  given  over  to  the  inculcation  of  apparent  knowl- 
edge, at  the  expense  of  modest  wisdom. 

As  in  the  outer  world,  so  in  the  colleges,  that  alone  which 
will  make  immediate  display  is  tolerated.  In  every  science 
of  which  the  author  has  personal  knowledge — mechanics, 
hydraulics,  thermodynamics,  economics  and  sociology — the  cur- 
riculum is  superficial  and  confusing  to  the  last  degree.  It  is 
supercrammed  with  detail,  yet  lacking  in  insight. 

No  fundamental  principles  worthy  of  the  name  are  taught. 
The  pupil  is  drilled,  as  if  to  cultivate  endurance,  upon  a  host 
of  problems  every  one  of  which  will  be  obsolete  long  before  he 
reaches  the  time  of  life  when  true  education  becomes  of  value. 

For  the  real  task  of  education  is  not  to  teach  youth  to  solve 
the  problems  of  its  undergraduate  days;  it  is  to  prepare  it 
for  solving  those  problems  which  will  arise  when  the  student 
is  forty  or  fifty.  Yet  in  our  universities  those  basic  principles 
of  cosmic  truth  upon  which  alone  one  may  rely,  when  the 
problems  of  later  life  have  been  met — problems  which  were 
undreamed  when  the  student  was  an  undergraduate — have  never 


796  MODERN   ECONOMIC   TENDENCIES 

been  imparted.  Yet  man  has  never  passed  through  a  hideous 
social  crisis  which  could  not  have  been  foreseen  and  prevented 
by  a  conservative,  but  courageous  and  timely,  reliance  upon 
wisdom  which  had  been  basic  for  centuries  before. 

For  instance,  in  the  simplest  of  all  these  sciences  mentioned 
— mechanics — I  have  never  yet  met  a  college-graduate  who  had 
been  taught  even  the  law  of  gravitation,  as  anything  more 
cosmic  or  universal  or  broadening  to  the  mind  than  an  ac- 
celeration relatively  to  the  earth's  surface.  In  history,  I  have 
never  yet  met  an  educated  adult  who  had  been  taught  the 
French  Revolution  as  anything  more  instructive,  or  as  anything 
less  childishly  impossible  a  fantasy,  than  that  the  aristocrats 
had  abused  the  peasantry  beyond  all  precedent,  so  that  the 
latter  revolted  and  guillotined  the  aristocrats. 

Yet  that  familiar  picture  is  a  sheer  superstition,  as  diametric- 
ally opposed  to  all  the  facts  of  history  as  any  pipe-dream. 
As  an  illustration  of  the  degree  to  which  modern  university- 
education  is  diluted  into  impotence  by  false  and  lazy  assump- 
tions, as  well  as  to  round  out  this  volume  with  a  lesson  drawn 
from  history,  it  is  worth  while  to  include  here  a  brief  outline 
of  the  significant  features  of  the  French  Revolution. 

The  French  Revolution. — The  first  truth  to  be  learned  con- 
cerning this  most  dramatic  of  all  social  convulsions,  as  a  lesson 
for  modern  problems,  is  that  the  trouble  did  not  originate  at 
all  in  any  extreme  abuse  of  the  peasantry.  This  is  not  saying 
that  abuse  of  the  peasantry  did  not  exist.  It  is  saying,  and 
emphasizing,  that  this  was  not  the  cause  of  the  outbreak  of 
revolution. 

For  the  peasantry  of  France  before  the  Revolution,  while 
unquestionably  oppressed  to  a  degree  which  is  revolting  to 
American  standards,  and  worse  even  than  the  English  poor  of 
that  day,  was  yet  far  more  liberally  treated  than  in  any  other 
country  of  continental  Europe.  All  over  Europe  to  the  east- 
ward from  France,  the  condition  of  the  peasantry  was  measur- 
ably worse  than  there.  If  brutalizing  oppression  had  been,  in 
the  eighteenth  century  or  at  any  other  time,  the  cause  of 
revolution — which  it  has  not — then  revolution  more  horrible 
than  that  in  France  must  have  broken  out,  long  before  1789, 
all  over  central  and  eastern  Europe. 

But  it  did  not.  Indeed,  after  the  French  revolution  had 
set  the  example,  it  actually  tried  to  do  this.  But  the  failure 


THE   PATH   BEFORE   US  797 

was  universal  and  signal.  For  all  of  these  countries  lacked  the 
real  cause  of  revolution — inventional  progress.  At  that  time 
France  and  England  led  the  world  in  applied  science  and 
invention. 

Secondly,  the  French  Eevolution  did  not  break  out  in,  nor 
even  about,  any  oppression  of  the  peasantry.  It  broke  out  in 
a  revolt  of  the  upper  classes  against  national  bankruptcy  at 
the  top,  and  not  against  poverty  at  the  bottom.  It  was  started, 
not  by  a  mob,  but  by  the  Third  Estate — the  conservative  Wall- 
Street  property-owners  of  that  day — who  had  been  convened  to 
cure  the  hopelessly  increasing  bankruptcy  of  the  throne;  while 
the  Paris  mob  celebrated,  happily  and  peaceably,  their  new- 
found hope  in  the  reconvening  of  parliament  after  more  than 
a  century  of  its  discontinuance. 

Then,  when  the  Third  Estate  had  successfully  defied  the 
authority  of  the  king,  instead  of  anarchy,  an  epidemic  of 
spontaneous,  legislative  and  proclamatory  reform  set  in,  and 
spread  all  over  France.  Within  three  months  it  had  repealed 
every  law,  tax  and  custom  which  had  been  oppressing  the 
peasantry  so  direly  for  decades.  So  far  as  reform  of  abuses 
of  the  peasantry  was  concerned,  the  French  Eevolution  had 
then  and  there  completed  its  entire  task ! 

Yet  Dr.  Guillotine  was  still  an  obscure  physician  in  the 
suburbs  of  Paris,  his  grim  but  humane  invention  still  two 
years  from  being  born!  Whatever  cause  of  popular  discontent 
had  lain  in  the  oppressions  of  the  old  regime  had  then  been 
removed.  Yet  the  horrors  of  revolution  then  lay  not  behind, 
but  in  the  future! 

Up  to  that  time  the  only  popular  uprising  had  been  the 
storming  of  the  Bastille.  But  the  Bastille  was  a  prison  which 
had  never  incarcerated  a  peasant!  Its  victims  had  all  been 
noblemen,  or  high  and  wealthy  commoners.  Therefore  it  was 
only  natural  that  the  assault  against  it  should  be  organized  by 
two  young  noblemen!  Although  the  mob  helped  to  carry  it 
through,  it  was  distinctly  an  aristocrat's  enterprise;  and  when 
it  was  over  the  government  continued,  stably  and  peaceably 
for  many  months,  in  the  hands  of  Mirabeau.  The  National 
assembly  was  called,  under  his  moderate  leadership,  to  formulate 
a  reform  no  more  radical  than  a  constitutional  monarchy! 

The  Eeign  of  Terror?  It  was  not  until  four  years  later 
that  the  Eeign  of  Terror  broke  out  and  the  guillotine  first 


798  MODERN    ECONOMIC   TENDENCIES 

became  really  active — and  when  a  people  revolts  from  below, 
with  exasperation  as  its  motive,  it  does  not  cool  its  heels  for 
four  years  before  acting ! 

Even  then,  the  Reign  of  Terror  had  full  warrant  for  some- 
thing drastic,  for  it  was  forced  into  being  by  as  dastardly  an 
act  of  treason,  on  the  part  of  the  king  and  aristocrats  in  con- 
spiracy— in  inviting  the  armies  of  Prussia  and  Austria,  both 
powerful,  prosperous  kingdoms,  to  invade  convulsed,  famine- 
stricken  France.  It  was  when  these  armies  crossed  the  border, 
and  not  until  then,  that  the  word  went  forth  that  every  person 
disloyal  to  France  must  die. 

The  people  died  willingly,  fighting  bare-footed  in  the  mud 
and  snow,  on  quarter-rations,  like  tigers,  until  the  well-muni- 
tioned armies  of  the  invaders  were  driven  back.  The  aristocrats 
died  less  willingly,  and  often  unjustly.  But  between  them  they 
burned  into  the  pages  of  history  such  a  record  of  the  superlative 
heroism  natural  to  all  levels  of  society,  and  of  the  hideous 
penalty  sure  to  fall  upon  all,  from  disloyalty  to  a  nation's  need 
for  growth  in  her  institutions,  as  makes  crucifixion  too  mild 
a  penalty  for  the  universities,  for  their  failure  to  teach  this 
lesson  to  all  our  youth. 

For  they  have  quite  failed  to  make  clear,  as  stands  out  from 
the  above  review  of  the  most  patent  facts  about  the  French 
Revolution,  that  wars  and  revolutions  are  incurred,  not  through 
moral,  but  through  mental,  deficiencies  on  the  part  of  the 
people.  And  here  "the  people"  means  those  at  the  top  as  well 
as  those  at  the  bottom. 

The  irritating  causes  lie  in  fixed  institutions,  which  remain 
unchanged  while  the  needs  of  the  times  alter,  rather  than  in 
individual  psychologies.  It  is  neither  the  snobbish  indifference 
at  the  top  nor  the  ignorant  bitterness  at  the  bottom  which 
causes  crises,  but  intellectual  timidity  and  inertia  everywhere. 

Responsibility  for  these  defects  rests  upon  those  who  standard- 
ize our  ideas,  rather  than  upon  those  who  steer  either  our 
morals  or  our  politics.  For  instance,  how  can  anyone  blame 
the  Great  War  merely  upon  inherent  Teutonic  savagery,  when 
the  one  fact  which  gave  that  savagery  temporary  power  over 
civilization  was  that  not  a  university  among  the  allied  nations 
gave  scientific,  accredited  warning,  ly  so  much  as  a  week,  of 
the  real  extent  of  a  cataclysm  which  had  been  gathering  head 
ever  since  Napoleon  fell! 


THE  PATH  BEFORE  US  799 

If  it  had  been  a  distant  collison  in  the  solar  system,  instead 
of  one  crouching  upon  our  doorsteps,  which  had  been  impending, 
twenty  universities  would  have  corroborated  each  other  in  its 
prediction.  But  we  have  no  science  of  sociology,  and  no  so- 
ciologists as  daring  as  Copernicus  or  Galileo. 

Inspection  for  Social  Insurance. — Wars  and  revolutions  are 
rendered  inevitable  by  our  mere  failure  to  understand,  and 
therefore  foresee,  the  trend  of  events.  Unsolvable  misunder- 
standings arise  from  a  conflict  between  those  fixed  institutions 
of  tradition  and  law  (by  which  society  protects  itself  as  the 
nautilus  by  its  shell)  on  the  one  hand,  and  upon  the  other, 
the  constantly  changing,  growing  demands  of  life  due  to  in- 
vention, procreation,  migration,  etc.  This  conflict  always 
manifests  itself  gradually,  in  submerged  unrest  and  in  our 
statistical  records,  long  before  men  get  to  fighting  with  men. 
A  social  structure  gives  just  as  many  warnings  of  its  approach- 
ing collapse  as  does  a  bridge,  a  boiler-shell  or  a  cyclonic  storm. 

All  that  is  needed  for  safety  from  any  of  these  is  properly 
organized,  technically  educated  inspection,  with  elimination  of 
all  artificial  inducements  to  suppress  prompt  report  of  findings. 
But,  under  our  present  university-system,  it  is  just  as  natural 
for  our  miseducated  society  to  tumble  blunderingly  into  wars 
and  revolutions,  as  it  does  now,  as  it  is  for  an  elderly  lady 
to  be  startled  when  a  car  starts  unexpectedly.  And  it  is  equally 
dignified. 

It  is  this  organization  of  the  intellectual  portion  of  society 
for  a  continual,  official,  scientific  prediction  of  all  social  events, 
maintaining  its  prestige  by  its  accuracy,  and  its  independence 
by  its  constant  touch  with  the  people,  which  is  sought  here. 
But  understanding  and  predicting  natural  phenomena  is  the 
official  business  of  a  university.  This  is  where  reform  must 
start. 

The  Function  of  our  Schools  of  Sociology. — This  is  par- 
ticularly the  plain  duty  of  our  schools  of  sociology.  The  prompt 
observation  of  changing  conditions,  the  constant  sounding  of 
public  opinion  through  freedom  of  speech  in  forums  for  adults, 
the  careful  report  of  flaws,  the  fearless  indication  of  rising 
stress  due  to  special  privilege  while  it  is  still  incipient,  the 
accurate  definition  of  the  problem  involved,  the  active  spread 
of  all  these  ideas  among  the  people,  and  definite  prophecy  of 
the  penalties  which  nature  is  sure  to  impose  upon  inaction — 


800  MODERN  ECONOMIC  TENDENCIES 

all  these  are  duties  for  which,  if  the  universities  neglect  them, 
there  is  no  other  home  in  our  social  structure. 

Yet  this  responsibility  the  universities  openly  shirk.  They 
force  these  sociological  responsibilities  to  wander  aimlessly,  0as 
homeless  orphans,  among  ignorant,  bitter  labor-unions,  non- 
professional  investigators  like  the  author,  or  political  parties 
such  as  the  Socialist — which  last  really  deserves  its  power  be- 
cause it  at  least  offers  the  people  a  concrete  program  of 
reform  upon  a  competent  scale  (however  erroneous  it  may  be), 
whereas  its  critics  offer  nothing  adequate.  But  from  the  uni- 
versities, in  place  of  a  clarion  call  to  a  broad,  definite  standard 
of  economic  loyalty,  with  a  scientifically  accurate  program 
of  action,  there  comes  only  an  incoherent  mumbling  of  ancient 
formulae,  and  an  endless,  miserly  recounting  of  statistical 
minutiae. 

I  have  heard  one  of  the  best  educated  men  in  America,  hold- 
ing his  undergraduate  degree  from  our  oldest  university,  ex- 
claim in  public  that  he  had  spent  most  of  his  life  in  unlearning 
what  had  been  taught  him  in  college.  Yet  during  his  lifetime 
the  fundamentals  of  human  wisdom  needed  for  the  detection 
of  such  truth  as  there  may  be  in  this  present  book,  for  instance, 
have  not  changed.  The  author  has  not  relied  upon  up-to-the- 
minute  data.  What  this  learned  man  has  found  to  be  erroneous 
since  his  graduation  should  have  been  recognized  as  such  by 
his  teachers,  even  when  he  was  young,  because  of  its  conflict 
with  the  eternal  verities.  But  no  college  dares  to  teach  the 
eternal  verities. 

The  trouble  is  not  that  no  one  is  capable  of  such  insight  as 
that.  The  trouble  is  that  the  universities,  like  every  established 
institution,  are  too  pharisaical  to  invite  the  prophets  to  become 
its  teachers. 

For  prophets  are  always  uncomfortable  people.  It  is  much 
more  comfortable  to  follow  empty  forms,  suppress  disturbing 
new  truth,  and  protect  special  privilege,  until  the  inevitable 
whirlwind  has  been  reaped — and  then  let  someone  else  do  the 
fighting. 

It  is  to-day  as  nineteen  centuries  ago.  Jesus  of  Nazareth 
gave  up  his  life  to  overthrow,  not  an  immorality,  but  the 
hideously  cruel  inertia  of  a  fixed  institution — the  hidebound, 
insincere,  narrow  church  of  his  day.  And  the  pharisees  of  to-day 
control  our  universities. 


THE  PATH  BEFORE  US  801 

It  was  this  university  indicted  above  for  unwisdom  which 
allowed  itself  to  incur  the  unspeakable  shame  of  holding  back 
progress  in  human  thought,  in  connection  with  the  Darwinian 
philosophy,  through  the  bigotry  of  Agassiz  and  through  the 
exile  of  John  Fiske.  Yet  now  it  dares  to  repeat  this  ignominy 
in  connection  with  that  greatest  problem  of  modern  science — 
which  was  emerging  even  when  Fiske  was  welcomed  back  as  a 
prodigal  son — the  economic  puzzle! 

Yet  other  colleges  are  equally  guilty.  Thus  a  branch  evening- 
school  conducted  by  another  of  our  larger  eastern  universities 
has  not  hesitated  to  teach  its  wage-earning  pupils,  anxious  to 
become  social  workers,  alleged  social  science  that  was  childish 
rot.  As  to  poverty,  for  instance,  it  taught  that  it  is  "due  to 
drunkenness,"  and  left  the  topic  there. 

That  poverty  is  invited  by  drink  is  not  to  be  denied.  The 
fact  is  obvious  to  every  schoolboy.  So  is  its  obverse,  that  drunk- 
enness is  invited  by  poverty.  No  one  needs  to  spend  hard- 
earned  wages  and  tired  evenings  to  learn  such  piffle  as  that. 
Real  wisdom  inquires:  Whence  arise  both  poverty  and  drunk- 
enness ? 

For  a  university  to  take  money  from  pupils  scarcely  able  to 
pay  it,  for  such  nonsense  as  that,  or  for  any  of  the  orthodox 
economics  quoted  earlier  in  this  book,  is  a  sheer  swindle.  There 
is  not  a  bucket-shop  in  New  York  which  is  guilty  of  such 
inexcusable  swindling  as  this;  for  the  bucket-shops  absorb 
money  which  is  knowingly  spent  in  gambling,  whereas  the  uni- 
versity swindles  money  as  sacred  as  the  pennies  of  children,  and 
wastes  time  which  is  beyond  price.  Whereas  the  bucket-shop 
cheats  only  its  patrons,  the  university  cheats  both  its  pupil  and 
the  state — for  the  state  necessarily  relies  upon  these  young 
people  and  their  social  ideas  for  its  salvation  a  decade  hence. 

University-Responsibility  to  Civilization. — Then  the  uni- 
versities fail  not  merely  in  their  teaching  of  their  youthful 
undergraduates,  but  far  worse  in  their  teaching  of  the  adult 
public  outside  their  walls.  They  not  only  fail  to  offer  the 
public  anything  adequate,  but  they  fail  to  give  even  passive 
encouragement  to  public  self-education.  Not  only  is  liberal 
discussion  by  outsiders  not  invited  to  enter  the  shelter  of  the 
college,  but  if  it  intrudes  it  is  arrested  as  soon  as  detected. 
There  is  not  a  single  college  which  fairly  and  frankly  debates 


802  MODERN   ECONOMIC   TENDENCIES 

economic  issues,  however  it  may  pretend  to  do  so.  The  author 
has  lectured  at  most  of  the  eastern  ones,  and  knows. 

It  is  true  that  they  put  the  various  books  on  social  reform 
on  their  library-shelves,  and  then  say  to  the  student:  "Note 
all  and  take  your  choice.  We,  your  teachers,  stand  for  naught 
decisive  nor  constructive."  There  is  not  a  school  to-day,  nor 
any  professor  acting  independently  of  his  school,  who  offers 
any  positive,  adequate  attack  upon  the  social  problem. 

For  the  great  need  of  the  modern  adult  public  is  a  scien- 
tifically guided  forum,  as  a  nation-wide  institution,  to  replace 
the  town-meeting  now  no  longer  practicable.  But  the  colleges 
have  forced  this,  their  own  proper  burden,  upon  the  churches 
and  the  labor-unions.  And  then  college-bred  men  exclaim 
against  social  unrest — as  if  a  ferment  could  ever  do  harm 
except  when  deprived  of  proper  outlet! 

Thus  the  New  York  Times  for  February  11,  1917,  reports: 

"Columbia  University  refused  last  night  to  allow  Count 
Ilya  Tolstoy,  son  of  Count  Leo  Tolstoy,  the  famous  Eussian 
philosopher  and  author,  to  speak  at  the  Eussian  Night  meet- 
ing of  the  International  Club,  in  the  assembly-hall  of 
Philosophy  Hall.  .  .  .  The  officers  of  the  International  Club, 
which  is  better  known  at  the  university  as  the  Cosmopolitan 
Club,  had  arranged  a  series  of  Saturday-night  meetings,  at 
which  noted  men  would  be  asked  to  speak.  The  club  has 
about  250  members,  who  comprise  more  than  thirty  national- 
ties.  Each  week  there  has  been  an  address  from  a  speaker 
of  a  different  nation,  and  it  was  decided  that  last  night 
would  be  Eussian  night.  Count  Tolstoy  was  chosen  as  the 
most  prominent  representative  of  his  nation  here." 

On  the  following  day  the  Times  quotes  President  Nicholas 
Murray  Butler,  of  Columbia  University,  as  saying: 

"We  have  a  rule  that  if  the  President,  or  the  head  of  a 
department,  doesn't  want  a  man  to  speak  here,  the  speech 
isn't  delivered.  If  a  man  has  charge  of  what  history  is 
taught  here,  he  has  a  right  to  say  who  shall  speak  here  about 
history.  .  .  .  We  have  too  many  people  of  all  sorts  coming 
to  the  university  and  making  speeches.  It  has  got  to  stop. 
Some  people  have  a  notion  that  a  university  is  a  sort  of 
lyceum — not  so." 


THE  PATH  BEFORE  US  803 

The  gage  thus  thrown  down  we  accept.  The  very  first 
responsibility  of  every  university,  toward  those  who  ultimately 
support  and  control  it — the  people — is  that  it  shall  be  a  lyceum. 

And  more.  It  shall  be  not  merely  an  open,  impartial  plat- 
form, like  the  forums  of  the  churches,  which  are  responsible 
only  for  the  maintenance  of  an  ethical  background  fit  for 
rational  discussion.  The  universities  are  in  duty  bound,  while 
permitting  the  freest  debate,  to  furnish  a  positive,  accurate 
and  adequate  scientific  answer  to  that  vast  social  problem  of 
poverty  and  wealth  which  every  serious  mind  agrees  can,  must 
and  shall  be  solved — by  reason,  if  the  universities  will  permit; 
otherwise  by  force. 

In  this  reference  to  force  the  author  cannot  be  misunder- 
stood, after  his  earlier  quotations  from  history  to  prove  that 
wrongs  are  never  righted  by  direct  attack,  as  meaning  that 
he  threatens  assault  upon  the  university-system  by  force  of 
arms.  What  he  does  mean  is  that  the  universities  are  now 
involving  themselves  inextricably,  by  their  mere  passivity  in 
the  face  of  heavy  intellectual  responsibility,  in  that  general 
crash  of  the  commercial  system  which,  lacking  competent  action 
by  the  universities  in  time,  must  soon  arrive  in  the  form  of 
a  sudden  shock  for  which  we  are  mentally  quite  unprepared, 
setting  all  people,  of  whatever  beliefs,  fighting  frantically  for 
bare  existence,  or  for  the  preservation  of  some  remnant  of 
political  ideal. 

The  only  simile  competent  to  the  situation  is  the  galley- 
scene  from  "Ben-Hur."  Here  Wallace  depicts  the  Roman  ship, 
driven  by  rowers  chained  to  their  benches,  as  equipped  with 
a  director  standing  at  the  stern,  tediously  beating  out  the 
time  for  the  strokes  of  the  oarsmen.  When  the  vessel  sinks 
in  battle  Roman  discipline  holds  the  director  to  his  post,  as 
the  chains  hold  the  men.  To  the  end  his  unaltered,  monotonous 
beating  continues,  until  literally  overwhelmed  by  the  waves. 

It  is  so  with  our  universities  to-day.  In  sociology  they  are 
merely  marking  time  for  their  chained  intellectual  slaves.  As 
the  impending  crash  of  their  master-system,  commercialism, 
approaches,  they  will  continue  this  unaltered  to  the  bitter  end. 
Heedless  of  every  preliminary  warning,  their  well-disciplined 
beating  of  the  commercialistic  tomtom  will  show  no  variation 
from  the  orthodox,  until  overwhelmed  and  silenced  forever 
by  the  disappearance  of  all  commercialism. 


804  MODERN   ECONOMIC   TENDENCIES 

Is  it  gradual  reform  which  you  wish?  Try  to  get  it  in  our 
university-brand  of  orthodox  sociology,  and  see  what  success 
you  have ! 

Responsibility  for  the  Impending  Economic  Crisis.— 
For,  although  this  book  has  everywhere  emphasized  the  idea 
that  it  is  worse  than  folly  to  blame  any  one  portion  of  society  for 
having  actively  and  maliciously  brought  us  into  our  present 
perilous  position,  yet  there  is,  in  reality,  one  group  which  is 
officially  responsible  for  whatever  world-crisis  may  impend, 
however  innocent  that  group  may  be  of  having  had  any  active 
part  in  its  creation.  Its  sins  have  been  those  of  omission. 
This  is  the  professional  teacher  of  political  economy,  whether 
he  be  seated  in  a  university-chair  or  in  an  editorial  sanctum. 
He  is  responsible  above  all  other  men  for  the  solution  of  our 
social  problems,  not  because  he  has  shown  toward  mankind  any 
greater  malice  or  greed,  nor  any  less  love,  than  others;  but 
because  he  has  dared  to  assume  what  seems  to  the  author,  at 
the  present  time,  the  most  heavily  weighted  robe  of  office  in 
the  land — that  charged  with  the  guidance  of  the  rising  genera- 
tion through  the  intricacies  of  modern  social  problems. 

He  has  dared  to  accept  the  custody  of  our  most  powerful 
appliances  for  influencing  public  opinion — the  press  and  the 
college.  He  has  dared  to  utilize  these  powerful  instruments 
for  the  formation  of  social  ideals  in  the  impressionable  young. 
He  has  dared  to  accept  an  office  toward  which  our  legislators 
must  turn  for  guidance,  in  acts  involving  far  more  human  life 
and  misery  than  is  controlled  by  a  general  officer  in  active 
warfare. 

During  the  last  quarter-century  the  universities  have  been 
cramming  their  libraries  with  untold  accumulations  of  data. 
During  this  same  period  they  have  been  stocking  the  country 
with  young  and  vigorous  graduates,  confident  in  their  acquisi- 
tion of  knowledge,  who  must  necessarily  be  our  reliance  for  the 
active  progress  of  civilization,  yet  whose  heads  have  been  con- 
gested with  as  false  and  incompetent  a  set  of  ideas  concerning 
current  social  evolution  as  it  is  possible  to  conceive. 

When  the  irresistible  train  of  events  has  brought  our  social 
progress  into  collision  with  that  impenetrable  mass  of  edu- 
cated ignorance,  all  of  us  must  suffer  from  the  shock.  Over 
this  class  the  revolution  which  its  incompetence  threatens  to 


THE   PATH   BEFORE   US  805 

create  will  stumble,  before  sweeping  it  into  oblivion,  as  the 
French  Revolution  stumbled  over  the  Girondins  in  1793. 

This  responsibility  for  the  preservation  of  understanding, 
law  and  order  now  bearing  upon  our  professional  sociologists 
is  greater  than  that  resting  upon  our  military  leaders  and  legis- 
lators together ;  for  we  must  rely  upon  our  universities  and  the 
public  press  to  guide  both  of  these.  Yet,  in  the  face  of  such 
a  responsibility  as  that,  these  men  have  proven  themselves  pro- 
fessional "poltroons"  (the  word  is  quoted  from  their  own  spokes- 
man), in  that  they  have  let  timidity  distort  or  choke  their 
natural  utterance.  For  I  dare  not  accuse  them  of  such  utter 
incompetence  as  would  be  implied  by  the  suggestion  that,  in  the 
face  of  their  access  to  untold  data,  they  are  unable  to  discern 
what  is  the  matter. 

"Social  Control."— In  Vol.  XII  of  the  "Publications  of 
the  American  Sociological  Society,"  reporting  its  meeting  on 
"Social  Control"  held  in  Philadelphia  in  December,  1917, 
appears  a  paper  upon  "The  Social  Control  of  the  Acquisition 
of  Wealth"  by  Professor  Hayes,  of  the  University  of  Illinois. 
In  the  course  of  this  paper  its  author  says: 

"The  absurdity  of  our  present  distribution  of  wealth  .  .  . 
[is]  .  .  .  illustrated  by  the  rapidity  with  which  property  is 
collected  in  the  hands  of  the  managers  of  industry.  We  are 
popularly  supposed  to  have  one  billionaire.  There  have  not 
been  a  billion  minutes  since  Christ  was  born.  To  accumulate 
a  billion  dollars  at  the  rate  of  $10,000  a  year  would  require 
a  thousand  centuries.  .  .  .  Even  one  of  our  more  moderately 
successful  multimillionaires,  who  acquires  a  fortune  equal  to 
only  2  per  cent  of  that  which  Mr.  Rockefeller  is  supposed 
to  possess,  has  a  sum  the  accumulation  of  which  at  the  rate 
of  $10,000  a  year  would  require  a  longer  time  than  has  elapsed 
since  the  birth  of  Christ/'  (Italics  mine.) 

Thus  the  inequity  of  modern  fortunes  and  incomes  has 
reached  the  degree  of  crass  absurdity.  In  this  lies  some  slight 
hope  of  their  abolition.  Special  privilege  thrives  upon  being 
blamed,  but  when  it  comes  to  be  ridiculed  it  cannot  long  sur- 
vive. Yet  even  with  the  aid  of  ridicule,  the  problem  remains 
of  finding  a  way. 

The  spirit  of  this  paper  of  Professor  Hayes  is  among  the 
best  to  be  found  among  professional  debates  of  social  problems, 
and  is  well  stated  in  the  following  language : 


806  MODERN  ECONOMIC   TENDENCIES 

"We  believe  in  very  cautious  exercise  of  this  new  power 
[of  social  control],  yet  we  begin  to  suspect  that,  with  our 
present  insight  into  economic  and  social  processes,  to  continue 
to  preach  the  doctrine  of  laissez  faire  is  little  better  than 
poltroonery  and  cowardice,  and  shirking  the  duty  of  social 
leadership. 

Unlike  mere  agitators,  nearly  all  economists  and  sociolo- 
gists are  in  an  attitude  of  extreme  circumspection  in  regard 
to  the  exercise  of  new-found  powers  of  social  control.  We 
are  not  willing  to  countenance  any  absurd  and  premature 
ventures.  But  neither  are  we  willing  to  be  poltroons — as 
the  men  of  Columbus'  day  would  have  been  if  they  had  re- 
fused to  put  to  sea  after  the  mariner's  compass  had  been 
invented." 

In  the  spirit  of  this  caution  and  circumspection  in  regard  to 
program  for  action  the  author  of  this  book  has  the  highest 
sympathy,  because  action  is  not  the  office  of  the  student.  But 
in  any  caution  or  circumspection  or  delay  in  stating  the  situation 
frankly,  there  can  be  found  only  grounds  for  disgust.  It  is  sheer 
poltroonery. 

This  poltroonery  is  intellectual,  rather  than  moral  or  physical, 
but  it  is  none  the  less  poltroonery.  The  average  professor  of 
political  economy,  following  his  president  and  trustees,  shies 
at  any  idea  larger  or  sharper  than  a  penknife  as  an  elephant 
shies  from  a  mouse. 

But  this  sort  of  poltroonery  is  no  less  treasonable  to  the 
state  than  is  any  other  sort.  Indeed,  it  is  more  so.  It  is  high 
time  that  intellectual  cowardice  be  publicly  denounced,  as  even 
more  treasonable  to  civilization  than  physical  or  moral  cow- 
ardice. 

Is  cowardice  too  strong  a  term?  Why,  if  the  American 
marines  at  Cantigny,  meeting  their  first  contact  with  civiliza- 
tion's most  hideous  problem  in  many  years,  had  thrown  down 
their  arms  and  fled  headlong  to  Paris — there  to  strut  about  in 
uniform  and  draw  their  pay  as  defenders  of  American  liberties 
— they  would  not  have  presented  a  more  shameful  spectacle 
of  treason  to  every  American  tradition  of  courage  and  sincerity 
than  our  professors  of  political  economy  are  now  exhibiting 
daily,  by  their  refusal  to  denounce  commercialism  openly  and 
officially !  You  cannot  drag  a  professional  sociologist  near 
enough  to  the  economic  enemy  for  him  to  find  out  where  and 


THE   PATH   BEFORE   US  807 

what  it  is.  "Commercialism  forever!"  he  will  shout,  and  then 
duck  for  cover,  mumbling:  "Properly  controlled,  of  course." 
Yet  this  does  not  hinder  their  posing,  in  rostrum  and  national 
society,  as  the  country's  leaders  in  scientific  thought  concerning 
social  problems.  (See  foot-note,  page  808.) 

We  blame  the  German  soldiery  for  cowardly  obedience  to 
inhuman  orders.  We  recall  with  pride  that  any  American 
enlisted  man,  if  ordered  to  shoot  down  defenseless  non-com- 
batants, or  to  torpedo  a  liner  laden  with  women  and  children, 
would  rather  mutiny  first,  and  face  a  firing  squad. 

But  what  is  it  that  our  professional  sociologists  are  doing? 
By  their  present  acquiescence  in  orders  to  remain  silent,  or  in- 
consequential, as  to  the  economic  problem,  they  are  condemning 
to  congestion  in  slums,  to  increasing  uncertainty  of  employment, 
to  rising  cost  of  living — and  thus  to  famine,  disease,  despair, 
crime  and  suicide — or,  instead  of  these,  to  bitter,  cruel  revolt — 
millions  where  the  Huns  murdered  thousands !  Do  they  dare 
to  confess  to  the  people  that,  in  the  face  of  a  responsibility  such 
as  that,  they  are  afraid  to  mutiny  against  presidents  and 
trustees  ? 

The  question  is  not  to  be  disposed  of  by  pleading  ignorance. 
If  ignorant  of  the  remedy,  why  are  they  there?  Or,  if  no  one 
knows  the  remedy,  why  is  not  that  their  first  proclamation  to 
the  people? 

It  is  urged  that  this  indictment  of  the  university-sociologists 
be  viewed  as  something  far  less  personal  than  any  grouch  on 
the  author's  part  against  his  former  colleagues,  or  than  any 
defect  of  character  happening  to  find  embodiment  in  the  pro- 
fessors. This  systematic  timidity  of  our  official  sociologists  is 
a  symptom  of  our  entire  university-organization.  As  such  it  is 
a  national  institution.  Its  indictment  cannot  but  be  painful 
to  those  comprising  it,  but  it  cannot  be  foregone  for  that 
reason.  For  there  is  no  feature  of  the  impending  crisis  so 
fraught  with  menace,  nor  so  widely  permeating  our  entire 
social  fabric,  as  this  lack  of  intellectual  courage  and  initiative 
among  our  teachers,  in  delaying  their  denunciation  of  com- 
mercialism. 

The  author  knows  well  what  it  means  to  suffer  ostracism, 
neglect,  and  loss  of  position  and  income  together,  because  of 
heresy.  He  is  the  last  one  to  taunt  any  man  for  hesitancy  in 
the  face  of  these.  But,  on  the  other  hand,  the  man  who  dares 


808  MODERN   ECONOMIC   TENDENCIES 

to  teach  any  brand  whatever  of  social  philosophy,  these  days, 
must  make  up  his  mind,  at  the  start,  to  regard  courage  as 
his  chief  stock  in  trade.  If  he  hasn't  it,  he  would  better  quit 
the  business  immediately.  He  would  better  resign  his  under- 
paid, self-respectless  job  now,  announcing  his  reasons  publicly, 
than  to  stay  and  face  what  is  coming,  in  the  way  of  ignominy.2 


2ln  a  vague  way  this  lack  in  our  universities  is  sensed  by  the  general 
public.  Thus  in  the  summer  of  1919  the  author  met  an  army-chaplain 
recently  home  from  splendid  service  at  the  front.  He  had  traveled 
five  hundred  miles  from  his  home,  to  learn  what  he  could  in  New  York 
City  as  to  this  patriot's  task  of  peacetime,  the  economic  problem.  He 
knew  nothing  of  the  author's  views  except  that  he  was  interested  in 
sociology.  He  asked  guidance. 

The  author  suggested  that  the  chaplain  would  find  little  help  in  the 
universities.  The  answer  came  like  a  shot:  "They're  afraid  to 
touch  it!" 

This  universal,  systematic  blue  funk  of  those  officially  responsible 
as  our  protectors  from  social  impact  and  explosion  is  our  one  greatest 
cause  for  apprehension.  For  if  they  fail  us,  whither  shall  we  turn 
for  help? 

On  November  21,  1919,  the  American  Academy  of  Political  Science 
held  its  annual  public  dinner  in  the  ball-room  of  the  Hotel  Astor,  New 
York  City.  The  topic  was  ' '  railroad-legislation. ' '  The  speakers  were 
all  of  national  prominence,  representing  the  several  sides  of  the  con- 
troversy. The  audience  was  as  brilliant  a  one  as  America  often  convenes. 

The  prime  facts  brought  out  were  that  the  railroads,  since  their 
control  by  the  government,  had  run  up  a  deficit  in  profits  (below  the 
average  of  $950,000,000  per  annum  attained  during  the  last  three  years 
before  government-control)  of  from  two  to  four  hundreds  of  millions 
per  annum.  This  deficit  now  aggregated  a  round  billion  of  dollars! 

The  central  question  underlying  all  pending  legislation  is  how  to 
return  these  properties  to  their  owners,  and  when,  with  this  deficit 
canceled.  Mismanagement  by  the  government  was  not  alleged  by  any 
speaker;  but  it  was  the  consensus  of  opinion  that  public  sentiment 
does  not  now  favor  further  government-control  or  ownership.  Only  the 
representative  of  the  wage-earners  urged  that. 

During  the  accumulation  of  this  deficit  rates  have  three  times  been 
raised.  Yet  the  only  remedy  or  policy  urged  by  any  of  the  speakers 
(except  he  who  represented  the  wage-earners)  was  the  further  raise 
of  rates! 

No  one  in  this  formal  assembly  of  America's  best  in  professional 
sociology  dared  to  state  that  the  trouble  with  railroad-finances  plainly 
lay  outside  of  the  railroads,  in  the  advancing  price  which  the  roads 
must  pay  for  every  pint  of  peanuts  consumed  by  them.  No  one  dared 
even  to  hint  that  the  railroad-problem  was  merely  one  small  side  of 
the  huge  economic  problem  as  a  whole — that  we  have  gotten  into  this 


THE  PATH  BEFORE  US  809 

Does  Social  Control  Exist? — For  the  insistent  question  now 
forcing  itself  upon  the  reluctant  attention  of  the  professional 
sociologist  is  this:  "Is  there  any  such  a  thing,  after  all,  as 
social  control?  For  certainly  there  is  no  sign  of  it  in  the  past; 
and  in  the  crises  of  the  past,  human  intelligence  certainly  came 
as  near  to  understanding  its  problems  as  it  does  to-day,  when 

terrible  situation  chiefly  because  we  have  tried  to  bite  off  little  nibbles, 
like  the  railroads,  and  consider  them  as  independent  wholes. 

No  one  dared  to  point  out  the  fact  that  the  situation  of  the  roads, 
helplessly  growing  poorer  and  poorer  under  always  rising  rates  of 
income,  was  an  exact  parallel  with  that  of  labor  in  every  line  of  work, 
which  is  steadily,  helplessly  growing  poorer  under  ever  rising  wages! 

No  one  dared  to  remind  this  able  audience  that  the  problem  of  the 
evening  was  the  hopelessly  increasing  bankruptcy  in  one  of  the  most 
fundamental  departments  of  industry;  and  that  it  was  bankruptcy  on 
high,  and  not  poverty  below,  which  forced  the  French  Revolution  onto 
the  pages  of  history!  No  one  in  all  this  ultra-professional  group  of 
sociologists  of  the  highest  rank  dared  to  point  out  that  the  whole 
evening's  array  of  gloomy  facts — too  long  to  reproduce  here — stood 
as  an  exact  parallel  to  the  struggles  of  Louis  XVI,  for  a  decade 
preceding  the  Revolution,  to  solve  his  financial,  rather  than  his  social 
welfare,  problems.  For  then  business-men  as  able  as  sat  among  that 
brilliant  audience  in  the  Hotel  Astor  tried  for  years,  and  in  vain, 
to  attain  solvency  in  a  moribund  system.  And  they  finally  ended  in 
themselves  springing  the  mine  which  blew  it  forever  into  oblivion! 

The  economic  tension  grows.  The  railroads  vie  with  the  food-supply  and 
the  coal-supply  in  vital  importance  to  the  community,  and  in  the  hope- 
less bankruptcy  of  finance  and  human  satisfaction  which  they  are 
acceleratingly  coming  to  embody.  Yet  no  one  in  that  most  responsible 
professional  gathering  had  the  candor  to  point  out  the  fact  that  the 
underlying  cause  of  the  whole  trouble  was  high  prices  everywhere  out- 
side these  industries. 

No  person  there,  either  inside  or  outside  the  Academy,  had  the  honesty 
to  point  out  that  not  a  businessman  in  all  that  august  audience  could 
help  raising  his  prices  repeatedly  during  the  recent  past,  and  that  he 
would  be  still  more  helpless  in  that  respect  during  the  Doming  years. 
No  one  there  pointed  out  that  this  promised  increasingly  hopeless 
bankruptcy  for  the  railroads,  the  topic  of  the  evening.  No  one  there 
seemed  to  sense  at  all  the  heavy  and  direct  responsibility  of  those  who 
dare  to  assume  the  dignity  of  professional  sociologists  for  doing  all 
these  things,  and  more! 

Intellectual  poltroonery?  Treason  to  the  public  need?  Insult  to 
public  intelligence?  Or  just  plain,  puerile  bunk?  Are  these  terms  too 
strong  for  such  an  abrogated  responsibility  as  was  manifest  all  that 
evening?  These  terms  were  not  too  strong  to  be  passed  about  the 
audience  and  corridors.  When  will  the  universities  awaken  to  the 
spectacle  they  are  now  making  of  themselves  on  the  pages  of  history! 


810  MODERN   ECONOMIC   TENDENCIES 

no  two  educated  men  can  be  found  who  even  approach  agree- 
ment as  to  what  is  the  trouble,  or  what  the  remedy. 

Uniformly,  up  to  date,  our  social  evolution  has  plainly  been 
propelled,  guided  and  coerced  quite  automatically,  by  events 
over  which  we  have  exercised  not  the  slightest  deliberate  control 
— of  which,  indeed,  we  have  not  even  been  conscious,  until  long 
after  they  have  had  their  forced  effect.  Every  forward  step  in 
social  evolution  has  been  forced  by  unexpected  events  upon 
a  public  reluctant  to  act.  We  have  not  even  been  able  to  foresee, 
let  alone  guide  or  control,  the  most  dominant  events  of  the  day. 

After  the  history  of  the  last  six  years  how  can  any  intelligent, 
sincere  person  speak  of  social  control?  Where  is  the  profes- 
sional sociologist,  or  statesman,  or  ruler,  or  party,  or  group, 
or  school,  which,  even  as  late  as  1913,  foresaw  even  one  of  those 
events  which,  in  gigantic  procession,  have  crowded  the  pages  of 
history  since  then?  Yet  in  1913  it  was  already  far  too  late  to 
exert  control  over  them! 

Was  it  he  who  apparently  instigated  and  guided  the  whole 
inauguration  of  the  war,  the  Kaiser,  the  worst  deluded  mortal 
of  the  lot — he  who  believed  that  he  was  merely  starting  out  to 
cross  Belgium  and  humiliate  France,  while  England  weakly 
fretted  and  America  gambled  in  stocks?  How  much  conscious 
"social  control"  did  he  exert,  when  he  set  going  events  which 
were  to  consolidate  the  entire  world  against  Germany,  narrow 
instead  of  extend  German  dominion,  and  annihilate  that  mili- 
tary power  which  the  Hohenzollerns  had  so  laboriously  and 
proudly  built  up,  as  the  soul  of  the  Germany  of  their  day? 

Or  was  it  President  Wilson,  who  promised  to  keep  us  out 
of  war,  who  mumbled  out  the  long  series  of  notes  regarding 
the  Lusitania  and  other  ships,  and  who  delayed  our  prepara- 
tion for  war  until  the  cause  of  liberty  was  all  but  lost — ending 
in  December,  1916,  with  his  call  for  a  statement  of  all  war- 
aims  at  a  time  when  such  an  act  pulled  the  planks  from  beneath 
every  belligerent  except  Germany?  Was  it  he  who  was  con- 
sciously controlling  social  evolution  toward  the  crushing  defeat 
of  Germany  by  American  force,  and  his  own  formation  of  the 
League  of  Nations,  two  years  later? 

Or  was  it  Abraham  Lincoln,  the  most  far-sighted  man  of  his 
day,  who  entered  the  White  House  sworn  to  abstain  from  touch- 
ing slavery  (otherwise  than  to  restrict  its  territorial  expansion) 
and  who,  sixteen  months  after  the  Civil  War  had  started,  stated 


THE   PATH   BEFORE   US  811 

his  duty  to  be  the  perpetuation  of  slavery,  if  that  would  per- 
petuate the  Union — yet  who,  within  five  months  from  that  time, 
formally  abolished  slavery,  the  cause  of  the  whole  struggle? 

Or  was  it  the  abolitionists,  who  advocated  from  the  start  the 
complete  elimination  of  slavery,  yet  played  no  visible  part  in 
its  accomplishment?  Or  was  it  the  mass  of  Americans  in  the 
North,  who  mobbed  the  abolitionists  in  1856,  yet  who,  in  1861, 
shouldered  muskets  and  died  bravely  for  the  abolition  of  slavery  ? 

Or  was  it,  perhaps,  the  slave-owners  in  the  South,  who  them- 
selves brought  the  whole  issue  to  a  head,  first  by  adopting  the 
"gag-rule"  in  Congress  in  1836 — which,  by  forbidding  discus- 
sion, made  fighting  inevitable — and  later  by  seceding,  under 
the  impression  that  the  North  would  not  fight?  Or  was  it, 
perhaps,  the  one  individual  who  educated  northern  sentiment 
more  toward  abolition,  within  a  week,  than  all  the  Garrisons 
and  Channings  had  done  in  thirty  years — the  Confederate 
officer  who  fired  the  first  shot  on  Fort  Sumter — acting,  we 
are  told,  without  the  sanction  of  the  Confederate  congress? 

Which  one  of  these  was  it,  pray,  who  was  exercising  the 
conscious  "social  control"  of  his  day? 

Or  was  it  George  Washington,  who  is  on  record  as  decrying 
any  suggestion  for  separation  from  England,  within  fifteen 
months  of  his  becoming  commander-in-chief  of  the  forces 
gathered  under  the  Declaration  of  Independence  from  England, 
who  exercised  this  wonderful  modern  "social  control"?  There 
was  not  the  slightest  sign  of  social  control  anywhere  in  our 
Eevolutionary  period;  yet  out  of  those  days  arose  the  most 
perfect  principles  of  social  government  yet  known  to  man ! 

Professor  Hayes  speaks  of  this  "power  of  social  control"  as 
"new-found."  Surely  it  must  be;  for  never  in  the  past,  from 
any  page  of  early  history  down  to  the  latest  daily  news,  has 
there  appeared  a  scintilla  of  evidence  of  any  slightest  control 
over  the  progress  of  the  day,  by  any  government,  ruler,  political 
party,  school,  journal,  group  or  individual.  There  has  not  been 
even  the  slightest  evidence  of  any  foresight  as  to  how  things 
were  trending.  The  series  of  events  in  history  have  come 
crashing  down  upon  the  heads  of  the  human  race — jarred  into 
motion  by  a  host  of  independent,  microscopic  actors,  each  doing 
apparently  non-social  acts,  quite  ignorantly  of  what  he  was 
accomplishing — as  unexpectedly  as  bricks  fall  upon  cellar-rats 
in  a  midnight  earthquake. 


812  MODERN   ECONOMIC   TENDENCIES 

Foresight  we  may  be  able  to  acquire  in  the  future.  (When 
we  have  acquired  it,  through  a  real  science  of  sociology,  we 
may  pour  lubricants  upon  the  pathway  of  events.  We  may  be 
able  to  interpose  between  colliding  interests  the  cushioning 
effect  of  an  intelligent  public  expectation  of  the  outcome.  But 
we  shall  accomplish  nothing  by  direct  effort.  We  cannot  con- 
trol social  tendencies  by  brute  opposition.  As  Abraham  Lincoln 
said: 

<fWhen  you  have  an  elephant  on  hand,  and  he  wants  to 
run  away,  better  let  him  run !" 

Modern  Indirectness. — For  modern  social  reactions  are  as 
complex  and  indirect  as  those  in  modern  machinery,  if  not  far 
more  so.  We  may  be  able  soon,  by  indirect  but  skillful  social 
action,  to  release  a  burst  of  social  energy  comparable  with  the 
broadside  of  a  modern  battleship,  which  is  controlled  by  the 
indirect  method  of  pushing  a  button  in  the  conning-tower.  But 
a  sheer  power  of  direct  social  control,  through  individual  psy- 
chology or  public  opinion,  is  not  promised  to  us  by  any  past 
human  experience  or  modern  science.  To  attempt  it  is  as 
silly  as  to  try  to  row  a  battleship  with  oars,  or  to  hurl  its 
projectiles  by  hand — or  even  to  discharge  one  of  its  huge  guns 
by  a  match,  as  was  the  method  a  century  ago. 

The  Supreme  Value  of  Candor.— This  being  the  uniform 
lesson  of  all  history,  why  cannot  we  have  a  frank  admission  of 
the  fact  from  those  who  are  officially  responsible  for  teaching 
the  lessons  of  history  into  modern  problems?  This  enlightened 
generation  of  men,  having  recently  fallen,  with  the  prescience 
of  a  blind  drunkard  reeling  into  a  ditch,  into  a  huge  world-war 
which  had  been  gathering  its  storm-cloud  for  over  a  century — 
yet  quite  unwarned  by  our  official  forecasters,  the  universities 
— now  comes  crawling  out  with  maudlin  mutterings  of  learned 
words  about  the  science  of  "social  control  I"  Bah  !•  Why  can- 
not we  have  at  least  the  moral  courage  to  admit  the  fact,  and 
then  the  intellectual  courage  to  think  adequately  about  it? 
Are  our  universities,  lacking  that  humble  admission  of  ig- 
norance which  forms  ever  the  first  step  toward  wisdom,  to 
continue  in  an  intellectual  pretentiousness  which  would  do 
credit  to  a  Hohenzollern  ? 

One  after  another  our  vast  social  systems — first  the  feudal, 
the  monarchical,  and  now  finally  the  politically  disgregate 


THE  PATH  BEFORE  US  813 

— have  been  forced  to  succumb,  not  under  any  conscious,  timely 
reasoning  and  deliberate  design,  nor  even  by  direct  attack, 
but  by  a  crashing  readjustment  of  opposing  forces  of  an  in- 
visible, subterranean,  earthquake  character — quite  insensitive  to 
public  opinion  and  quite  blindly  as  to  any  science  of  social 
evolution.  For  foresight,  guidance  or  restraint  of  any  of  these 
things  are  not  only  beyond  the  powers  of  any  existing  govern- 
ment, but  that  scholarly  humility  which  necessarily  precedes  the 
acquisition  of  any  such  a  power  is  now  systematically  excluded 
from  the  policies  of  our  universities.  Now  that  the  signs  of 
a  coming  huge  world-revolution,  pivoting  upon  the  distribu- 
tion of  wealth,  have  become  menacing,  if  not  certain,  there  is 
not  a  university  in  America  which  dares  to  teach  that  poverty 
is  an  artificial  institution,  or  that  interest  and  dividends  are 
wrong  and  unnecessary,  or  dares  to  enter  the  problem  incisively 
in  any  way,  with  the  unshakable  conclusions  of  the  various 
sciences  of  material  energetics  firmly  beneath  its  feet. 

The  Guiding  Forces  of  Social  Evolution. — For  it  is  road- 
building,  canals,  navigation,  mechanical  power,  railways,  elec- 
trical communication,  and  the  whole  string  of  factories  and 
inventions  which  have  followed  these — it  is  all  these,  and  neither 
any  conscious  science  of  social  control,  nor  any  parliamentary 
debate,  nor  any  governmental  astuteness — which  have  forced 
upon  us  in  the  past,  in  succession,  the  American  and  French 
Revolutions  of  the  eighteenth  century,  each  more  fruitful  of 
progress  in  human  government  than  any  other  single  step  in 
history;  the  English  economic  reforms  of  the  early  nineteenth 
century;  our  own  Civil  War  of  fifty  years  ago,  with  its  final 
abolition  of  negro-slavery;  and  finally  this  great  European 
War  of  to-day — to  result,  we  hope,  in  the  formation  of  that 
world-government  which  the  intellectual  vigor  of  our  uni- 
versities ought  to  have  forced  upon  us  without  bloodshed  a 
generation  ago. 

Each  of  these  advances  in  civilization's  institutions  have  been 
forced  upon  us  quite  against  everybody's  will.  None  came  by 
deliberate  intent.  And  so,  at  last,  it  is  a  quite  similar  line  of 
purely  mechanical  invention,  done  without  the  slightest  intent 
of  social  control,  which,  equally  subconsciously  and  uninten- 
tionally, is  forcing  us  into  a  critical  economic  condition — one 
from  which  we  are  to  be  extricated  (it  appears  from  the  present 
negative  policies  of  the  universities)  only  by  a  cataclysm  more 


814  MODERN  ECONOMIC   TENDENCIES 

gigantic  and  hideous  than  any  yet  recorded — but  to  a  resultant 
advance  in  civilization  as  far  beyond  the  comprehension  of  the 
day  as  was  the  case  in  each  of  these  past  instances. 

Dissension  the  Germ  of  Revolution.— For  certainly  there 
is  less  evidence  of  social  control  to-day,  in  this  now  pending 
economic  crisis,  than  at  any  earlier  period.  The  one  most 
striking  symptom  of  the  times  is  the  fact  that  there  cannot 
be  found  any  two  educated  persons,  even  among  those  who 
have  devoted  their  lives  to  the  study  of  sociology,  who  agree 
broadly  as  to  what  is  the  trouble,  or  what  the  remedy — except 
the  socialists,  into  whose  power  our  mere  neglect  to  agree  is 
destined  temporarily  to  thrust  us.  On  the  side  of  reform  and 
protest  there  is  nothing  but  endless,  pointless  debate.  But 
on  the  other  side,  on  the  side  of  commercialism,  no  wordy 
defense  wastes  invaluable  time;  but  endless  energy  of  action 
proceeds  acceleratingly  to  undermine  the  state,  with  steadily 
rising  prices  and  periodic  paralyses  of  employment. 

All  this  means  two  things:  First,  that  revolution  is  in- 
evitable, because  where  agreement  over  a  burning  question 
proves  impossible,  a  fight  is  the  only  alternative.  Secondly, 
we  fail  to  agree  because  we  possess  no  science  of  sociology. 
Indeed,  of  all  the  misleading  positions  regarding  matters  of 
national  importance  for  which  our  professional  sociologists  are 
now  responsible,  there  is  none  so  mischievous  as  their  assump- 
tion that  we  do  now  possess  such  a  science,  competent  to  guide 
us  out  of  our  always  growing  difficulties.  For  this  assumption 
gives  us  a  blatant  cocksureness  where  we  need  most  that  humility 
which  is  the  foundation  of  wisdom. 

Scientific  Superstitions. — Their  efforts  at  the  attainment  of 
such  a  science  are  paralyzed  by  their  failure  to  recognize  so- 
ciology as  merely  one  branch  of  the  great  circle  of  natural, 
energetic  sciences.  Just  as  the  ancients  were  hopelessly  de- 
barred from  attaining  any  useful  science  of  astronomy,  so  long 
as  they  believed  in  the  animation  of  each  heavenly  body  by 
some  deity  unhampered  by  natural  law,  so  we  to-day  are 
shackled  in  our  sociology  by  our  insistent  belief  in  the  guidance 
of  all  social  phenomena  by  mere  whim  or  demagogy,  or  even 
by  mere  suggestion,  acting  through  the  psychic  nature  of  the 
individual  as  its  determinant. 

Our  present  insistence  upon  the  complete  freedom  of  the 
individual  will  in  public  matters,  and  upon  the  competence  of 


THE   PATH   BEFORE   US  815 

the  individual  psychology  to  explain  all  social  phenomena,  is 
out  of  all  consonance  with  the  now  accepted  universality  of 
natural  law.  Until  we  free  ourselves  from  these  scientific 
superstitions  we  shall  never  attain  to  a  modern,  scientific, 
Copernican  sociology — accurate  in  its  predictions  because  based 
upon  unvarying  mathematical  laws  of  mass-action,  rather  than 
concentrated  upon  the  peculiarities  of  each  social  atom;  and 
true  because  recognizing,  as  in  all  the  other  natural  sciences, 
relationships  rather  than  individuals  as  the  basis  underlying 
all  energetic  phenomena. 

University-Militarism. — Thus  the  trouble  with  the  educated 
portion  of  society  is  that  it  has  weakly  forsworn  its  birthright 
— intellectual  courage  and  sovereignty.  It  has  abandoned  its 
faith  in  the  competence  of  reason  to  solve  these  problems  by 
reliance  upon  the  supremacy  of  natural  law,  and  has  turned 
thence  to  faith  in  superstitions  in  place  of  explanations,  and 
in  force  as  a  corrective  toward  civilization. 

The  author  is  not  a  pacifist.  He  believes  in  the  use  of  force 
when  the  time  for  it  has  come,  as  the  policy  cheapest  in  human 
suffering.  But  he  believes  in  recourse  to  force  only  after  our 
official  guides,  the  universities,  have  pursued  their  proper  re- 
liance upon  scientific  fact,  upon  principles  of  universal  law 
connecting  fact  with  fact,  and  upon  incisive  analysis,  deduc- 
tion, synthesis  and  prediction,  very,  very  much  farther  than 
has  been  the  case  in  any  recent  social  crisis. 

Without  speaking  for  other  colleges,  certainly  the  author's 
own  university,  Yale,  has  recently  put  into  the  settlement  of 
the  pending  crisis  with  Germany,  by  force,  an  amount  of 
effort  and  courage  which,  had  it  been  directed  into  the  only 
field  proper  for  a  university — a  scientific  prediction — and  at 
the  proper  time,  would  have  made  the  Great  War  impossible. 
For  if,  during  the  last  quarter-century,  Yale  and  her  alumni 
had  been  devoting  even  one-tenth  of  the  energy  and  determina- 
tion which  she  is  now  investing  in  the  cure  of  German  militarism 
by  force,  to  an  equally  forceful  advocacy  of  America's  volun- 
tary entrance  into  her  proper  share  in  the  world's  responsi- 
bilities, by  the  formation  of  a  world-government  having  power 
to  enforce  peace — if  she  had  even  predicted  with  unhesitating 
scientific  authority  the  world-events  which  all  study  of  past 
history  now  shows  even  the  layman  to  have  been  inevitable — 
if  she  had  merely  predicted  the  truth  regarding  our  own 


816  MODERN   ECONOMIC   TENDENCIES 

country,  that  it  would  be  sure  to  fight — then  Belgium  would 
never  have  been  invaded. 

Germany  would  then  have  known  what  to  expect;  and  it 
is  unquestionable  that,  had  she  known  what  was  coming,  she 
would  never  Jiave  started  the  war.  Ten  millions  of  lives — a 
thousand  of  them  sons  of  Yale — would  have  been  saved! 

Yale  is  not  even  loyal  to  herself,  not  to  mention  her  country. 
So  long  as  she  continues  to  subsist  upon  dividends,  and  to 
be  guided  by  trustees  whose  life-religion  has  been  dividends, 
she  will  never  have  more  than  a  boy's  comprehension,  however 
fine  her  vaunted  spirit,  of  the  man's  meaning  of  "for  God,  for 
country  and  for  Yale."  3 

If  Yale  were  as  wise  as  she  is  brave — and  it  is  far  more 
her  business  to  be  wise  than  it  is  to  be  brave — or  if  her  courage 
were  more  of  the  gray-matter  variety,  and  less  of  the  bull- 
necked,  hard-boiled  stamp — or  if  she  were  half  as  courageous 
and  patriotic  in  the  face  of  social  stress  at  home,  as  she  is 
under  martial  peril  across  the  Atlantic — then  her  attitude  to- 
ward economic  problems  would  be  the  exact  reverse  of  what 
it  is  now.  She  would  then  be  insisting  upon  the  most  pene- 
trative debate,  by  her  professors,  by  her  students  and  by  the 
public  invited  within  her  walls,  of  the  horrid  and  obvious 
inequities  and  inefficiencies  of  the  commercial  system.  She 
would  then  be  doing  this  with  the  same  obstinacy  with  which 
she  now  discourages  anything  effective  in  this  direction.  She 
would  then  be  insisting  upon  her  faculty's  promulgation  of 
a  competent  constructive  program  for  economic  democracy — 
or  at  least,  of  a  social  philosophy  competent  to  explain,  in  con- 
sonance with  accepted  natural  law,  all  major  social  phenomena 
now  prevailing.  Or,  failing  in  both  of  these,  she  would  insist 
upon  the  resignation  of  said  faculty. 

Everywhere  she  would  be  preaching  the  obvious  fact  that, 
lacking  a  scientific  explanation  to  which  all  men  can  turn  for 

3  Yale  sends  out,  in  May,  1920,  a  circular  to  her  alumni  calling  atten- 
tion to  the  poverty  of  her  assistant-professors.  Yet  for  this  obvious 
injustice  she  has  no  better  remedy  to  offer  than  that  prescribed  by  every 
ignorant  trades-union  and  socialist  in  the  land,  namely,  more  pay.  She 
no  more  dares  to  preach  to  her  alumni  the  simple,  scientific  truth,  that 
(under  commercialism)  the  hardship  of  her  intellectuals  must  increase 
with  every  day  passed,  and  with  every  dollar's  rise  of  wages  and 
salaries,  than  she  dares  to  open  her  doors  for  others  to  preach  what  she 
fears  to  hear  whispered,  namely,  that  commercialism  is  as  inequitable 
and  inefficient  as  slavery,  and  is  equally  doomed. 


THE   PATH   BEFORE   US  817 

guidance  in  unity  of  action,  revolution  is  inevitable;  for  every 
revolution  of  past  history  has  .  been  caused  by  mere  paralysis 
of  progress,  by  disagreement  as  to  what  to  do  in  the  way  of 
reform.  She  would  be  everywhere  stripping  from  revolution 
both  its  menace  as  an  event  instigated  by  malice,  and  its  ob- 
scure horror  as  a  mysteriously  veiled,  recondite  thing.  She 
would  insist  upon  revealing  it  in  its  natural  aspect,  as  a  thing 
forced  upon  wholesome  men  by  the  mere  lapse  of  time,  in  the 
face  of  a  failure  to  agree  as  to  what  the  trouble  and  what  the 
remedy — which  are  the  conditions  confronting  us  to-day. 

Conversely,  she  would  not,  as  now,  be  supporting  and  de- 
fending systematically  our  own  American  brand  of  autocratic 
special  privilege  and  combative  waste — commercialism — merely 
the  last  among  all  those  which  have  burdened  the  progress  of 
liberty  down  the  pages  of  history.  She  would  not  be  absolving 
this  big  American  cousin  of  Hohenzollernism  merely  because 
it  is  as  unconscious  of  being  wrong  as  Hohenzollernism  was, 
or  as  slavery  was,  or  as  Louis  XVI  was — while  sending  her 
boys  out  to  die  amidst  its  artificial  antagonisms.  She  would 
not  for  an  instant  be  tolerating  the  superficial,  unscientific, 
unpatriotic  economic  nonsense  quoted  earlier  in  this  book — 
which  proves  acceptable  merely  because  it  whitewashes  the 
special  privileges  of  commercialism. 

If  the  presidents  and  trustees  of  all  these  martial  universities 
had  taken  no  initiative  whatever  in  the  organization  of  military 
resistance  to  the  menace  of  Prussian  oligarchy — if  they  had 
given  no  patriotic  lectures,  arranged  no  courses  of  military 
instruction,  forbidden  the  use  of  the  campus  for  military  drill, 
and  had  failed  to  co-operate  with  the  alumni  in  equipping 
artillery  and  ambulance  corps — which  is  the  exact  opposite  of 
all  which  they  did  do — they  would  then  have  been  guilty  of  a 
disloyalty  to  American  liberty,  justice,  autonomy,  stability  and 
prosperity  not  one-quarter  so  great  as  that  which  for  years 
past  has  sullied  their  record  beyond  cleansing.  For  deep  shame 
has  been  embodied  in  their  hostile  or  indifferent  attitude  to- 
ward free,  active,  accurate,  fearless  and  effective  criticism  of 
that  commercial  oligarchy  which  is  now  not  merely  threatening 
us  from  a  distance,  as  Germany  did,  but  which  has  long  been 
actually  undermining  America  right  at  home.  For  commer- 
cialism's obscure  inefficiencies,  its  relative  famine,  its  legislative 
intrigue  and  its  propagandist  censoring  of  the  press,  all  sur- 


818  MODERN   ECONOMIC   TENDENCIES 

pass,  while  they  parallel,  what  we  got  from  Germany  in  these 
directions. 

For  the  German  peril  had  cost  us,  at  the  time  we  went  to 
war,  not  nearly  one-thousandth  of  one  per  cent  of  our  popula- 
tion. Whatever  may  have  been  Germany's  intentions  in  the 
way  of  intrigue,  she  did  not  possess  the  ability  to  invade  us. 
She  must  work  her  real  evil  three  thousand  miles  from  our 
borders — and  we  ourselves  discovered  later  the  physical  limita- 
tions to  that  program. 

But  the  commercial  menace  is  in  our  very  midst.  Distance 
presents  no  obstacle  to  its  operation  against  our  national  life. 
It  preys  upon  our  vitals  from  their  innermost  cells — where  we 
no  more  comprehend  its  poisonous,  paralyzing,  convulsing  office 
than  Daniel  Webster  understood  spinal  meningitis  germs.  It 
huddles  us  into  congested  cities  and  leaves  our  -country  unem- 
ployed. It  scrimps  us  in  our  daily  supplies  of  food,  shelter, 
transportation,  information  and  amusement.  It  throttles  our 
freedom  of  speech.  It  censors  our  press.  It  corrupts  our 
education  as  to  its  own  true  nature.  It  chokes  the  pulpit's 
instinctive  denunciation  of  its  inherent  selfishness.  Its  in- 
triguing propaganda,  however  it  may  sometimes  be  sincere,  is 
everywhere — and  is  everywhere  degrading. 

Its  current  toll  upon  our  lives  (not  to  mention  our  for- 
tunes) is  measurable  in  integral  percentages  of  the  population 
— a  thousandfold  of  Germany's  most  hostile  successes.  Its 
final  overthrow  is  to  be  had — if  we  may  compute  from  our 
only  past  experience  with  internal  oligarchy,  in  the  abolition 
of  slavery — and  if  we  are  to  lack  timely,  incisive  debate  in 
the  universities — for  not  less  than  a  round  ten  million  American 
lives,  not  counting  those  lost  abroad.  Of  these,  probably  one 
million  will  go  by  direct  violence  in  the  open  streets,  while  the 
rest  die  obscurely  from  famine  and  pestilence. 

Yet  within  the  precincts  of  our  universities,  dedicated  as 
they  are  to  wisdom  as  the  prop  of  American  liberties,  this  dire 
enemy  of  our  most  cherished  heritages,  diluting  when  it  does 
not  poison  every  cell  of  our  national  life,  must  not  even  be 
criticised,  in  any  way  suggesting  its  overthrow!  The  true 
nature  of  interest,  dividends  and  profits;  the  paralyzing  waste 
of  energy  in  the  gratuitous  antagonisms  of  commercial  com- 
petition; the  morally  degenerative  deficit  in  hiring-power  due 
to  all  this;  even  the  pure  larceny  involved  in  surplus — none  of 


THE   PATH   BEFORE   US  819 

these  may  be  accurately  analyzed  within  their  auditoriums, 
before  their  classes  of  rising  citizens,  in  even  the  most  scientific 
spirit,  for  fear  of  offending  vested  special  interests,  or  of  jolting 
uncomfortably  those  rigid,  conservative  prejudices  which  have 
ever  been  the  seed  of  war  and  revolution! 

Or  perhaps  this  timidity  rests  in  a  fear  of  agitating  public 
opinion  info  revolution.  Yet  their  own  scientific  sociologists 
should  long  have  been  teaching,  everywhere,  that  no  revolution 
of  past  human  experience  has  ever  arisen  as  the  result  of 
voluntary  agitation,  but  always  merely  as  the  fruit  of  repres- 
sion of  adequate  reform  in  the  face  of  advancing  events — that 
it  has  always  developed  automatically  and  relentlessly,  deaf 
alike  to  appeals  to  come  or  to  stay  away ! 

Poltroonery?  Slavery?  Disloyalty?  Where  is  the  exag- 
geration in  these  terms?  We  have  poured  them  without  stint 
upon  the  heads  of  those  who  hesitated  to  resist,  by  measurable 
loss  of  life,  Germany's  aggressive  insolence.  We  have  hurled 
them  unhesitatingly  at  those  who  were  guilty  of  no  greater 
disloyalty  than  an  inability  to  see  the  connection  between  Ger- 
many's invasion  of  the  liberties  of  Europe  and  menace  to 
liberty  in  America.  Yet  Germany's  best  endeavor  was  but 
puerile  impotence  in  comparison  with  the  effectiveness  of 
American  commercialism — the  subconscious  action  of  the  cream 
of  the  brains  and  energy  of  that  nation  which  never  yet  has 
been  beaten. 

If  Yale  were  really  that  center  of  both  wisdom  and  patriotism 
which  she  pretends  to  be  she  would  now  know  with  certainty, 
and  would  be  predicting  fearlessly,  that,  lacking  prompt  or- 
ganization and  drastic  action  by  the  hundred  million  Ultimate 
Consumers,  guided  accurately  by  the  universities,  her  sons  will 
soon  again  be  fighting  valiantly  for  world-democracy  and 
liberty.  But  this  time  the  fight  will  not  be  upon  foreign  soil. 
It  will  be  in  the  streets  of  our  own  cities.  She  would  know 
and  say  that  the  responsibility  for  that  fight  rests  not  upon 
those  who  predict  its  necessity,  but  upon  those  who,  neglecting 
all  preparedness  by  ignoring  the  relentless  growth  of  the  sole 
cause — commercialism — make  timely  preventive  action  impos- 
sible. 

This  coming  battle  will  nominally  be  for  law  and  order, 
between  a  dozen  factions,  each  denouncing  the  policy  of  the 
other  as  treason.  Largely,  also,  the  fight  will  be  for  food  and 


820  MODERN   ECONOMIC   TENDENCIES 

shelter — for  milk  for  the  babies,  and  fuel  and  safety  for  the 
mothers.  But  just  as,  in  the  Civil  War,  the  nominal  cause 
(secession)  was  merely  the  cloak  for  the  real  cause  (slavery), 
so  the  true  cause  of  the  coming  battle — commercialism — will  be 
equally  disguised. 

Really  the  fight  will  be  to  overcome  a  three-headed  enemy. 
First  the  economic  injustice  and  inefficiency  of  the  commer- 
cial system.  Secondly,  the  obvious  ignorance  among  the  millions 
whom  it  has  oppressed.  Thirdly,  the  disguised  ignorance  of 
those  whom  it  has  benefited,  the  nominally  educated  man.  For 
our  direst  menace  lies  not  in  the  second  class,  but  in  that 
mental  unpreparedness  which  lies  embodied  in  the  crass  mis- 
conceptions of  social  anatomy  and  reaction,  now  universally 
cherished  as  superstitions  among  our  college-alumni. 

Of  these  three  evils  the  last  has  been  created  directly,  and 
the  first  two  have  been  fostered,  by  the  systematic  subservience 
in  spirit  of  our  universities  to  the  philosophy  (or  bigotry)  of 
organized  wealth.  This,  with  its  resultant  intellectual  paraly- 
sis, must  continue  so  long  as  our  universities  continue  to  subsist 
upon  dividends  from  endowments,  or  upon  gifts  from  wealthy 
alumni,  instead  of  upon  fees  for  instruction. 

Let  it  never  be  forgotten  by  any  loyal  Yale  man  that  the 
Yale  men  of  the  near  future,  many  of  them  now  in  knicker- 
bockers, will  then  be  fighting  desperately  (and  temporarily  a 
losing  fight) — if  every  precedent  of  past  history  may  be  trusted 
— to  secure  a  peace,  prosperity  and  public  stability  which  never 
can  be  had  until  those  very  commercialistic  doctrines  which 
Yale  is  now  actively  circulating,  sanctifying  and  fortifying  have 
been  so  ground  down  into  disproof,  by  the  automatic  proces- 
sion of  events,  that  never  again  will  man  dare  to  suggest  their 
revival! 

Warrants. — If  these  criticisms  of  our  universities,  as  to  their 
science  of  sociology,  should  be  regarded  as  unnecessarily  acri- 
monious, it  must  be  remembered  that  the  issue  at  stake  is  no 
mere  academic  quibble.  Judging  from  past  history,  it  involves 
more  life,  property  and  human  misery  than  did  either  the 
Civil  War  or  the  Great  European  War.  The  issue  is  really 
one  of  loyalty  versus  treason  to  civilization.  The  conflict  which 
hangs  in  the  balance,  pending  decision  by  the  universities 
whether  they  will  assume  leadership  toward  liberty  or  not,  is 
a  world-wide,  international,  civil  war  such  as  has  never  before 


THE  PATH   BEFORE   US  821 

blazed  the  pages  of  history,  in  similar  magnitude,  although  many 
a  time  it  has  recurred  in  kind. 

Modern  Patriotism. — Of  course,  as  individuals,  both  pro- 
fessors and  editors  can  do  little  to  reform  our  economic  in- 
stitutions. But  as  professions  they  can  do  much  to  cultivate 
the  one  requisite  for  minimizing  the  misery  of  revolution — 
mental  preparedness  on  the  part  of  the  public.  For  if  we  had 
space  here  for  analysis  of  other  social  crises,  in  all  lands,  it 
could  be  made  plain,  and  it  would  be  emphasized,  that  the 
bulk  of  the  suffering  involved  in  each  of  these  arose  neither 
from  the  loss  of  the  old  regime,  nor  from  the  imperfections  of 
the  new,  but  solely  from  that  interregnum  of  anarchy  which  was 
made  inevitable  by  the  fact  that  the  old  was  allowed  to  collapse 
in  the  midst  of  a  public  opinion  quite  unprepared  for  the  shock. 

This  deficient  public  opinion  did  not  know  in  advance  that 
the  old  was  obsolete  and  bad,  and  that  all  classes  would  be 
better  off  without  it.  Hence  it  first  opposed  blindly  and 
tyrannically  all  critical  or  effective  debate.  Then,  when  the 
old  regime  had  exploded  automatically  in  its  hands,  and  left 
the  people  adrift,  they  clung  to  its  dead  fragments  with  the 
energy  of  despair,  unable  to  imagine  life  without  it. 

This  defective  public  opinion  had  not  been  equipped  for 
knowing  even  in  which  direction  lay  the  path  to  a  newer  and 
better  system;  and  so  several  cruel,  futile  years  of  experiment, 
with  innumerable  half-hearted,  belated  endeavors  at  puerile 
plans  for  reform,  were  always  allowed  to  eat  up  the  stores  of 
food  and  scatter  the  traditions  of  law-abidance.  Thus  nothing 
effectively  constructive  could  be  accomplished  until  after  the 
naked  horrors  of  anarchy,  famine  and  pestilence,  brought  on 
by  the  economic  inadequacy  of  the  many  mistaken  and  short- 
sighted reforms — together  with  the  exasperation  of  ill-advised 
and  treasonable  efforts  at  the  restoration  of  the  old  regime — 
had  finally  brought  the  people  face  to  face  with  the  one  plan, 
as  the  only  thing  possible,  which  reason  should  have  dictated 
peaceably  from  the  start.  This  has  always  been  the  complete 
abolition  of  that  inhuman  system  which  men  had  been  trying 
to  keep  alive  for  years,  by  nibbling  adjustments  called  reforms. 

It  is  the  responsibility  for  the  avoidance  of  all  this  which 
now  rests  so  heavily  upon  our  professional  sociologists,  wherever' 
they  may  abide — in  university,  editorial  den,  legislature,  com- 


822  MODERN   ECONOMIC   TENDENCIES 

mission  or  court.  Let  civilization  now  pray  again  that  it  ex- 
pects every  man  to  do  his  duty. 

Therefore  this  is  the  first  patriotic  duty  of  every  editor  and 
professional  sociologist,  to  be  carried  out  as  his  individual 
judgment  may  dictate:  To  teach  everywhere  that  commer- 
cialism is  obsolete,  inefficient  and  unjust,  and  that  it  must 
go;  that  everyone  will  be  vastly  better  off  when  it  has  gone; 
and  that  its  place  must  be  taken  by  an  economic  democracy 
based  somehow  upon  the  natural  sovereignty  of  the  Ultimate 
Consumer.  With  these  essentials  once  understood,  both  the 
endless  problem  as  to  details  and  the  unavoidable  shock  of 
any  change  in  system,  will  sink  into  innocuous  side-issues. 

To  this  end  each  of  these  professions  should  long  ago  have 
united  in  a  declaration  of  independence  of  speech  such  as  no 
power  above  them  would  dare  to  deny.  Failing  in  this  duty, 
there  must  always  be  visible  upon  their  professional  togas  a 
huge  stain  of  blood,  cowardice  and  shame. 

Governmental  Safety. — Why,  just  look  the  situation  in  the 
face !  Let  us  imagine  that,  when  this  country  discovered  that 
it  was  really  involved  in  the  German  peril,  it  had  simultane- 
ously discovered  that  every  American  university  and  every 
American  newspaper  had,  for  decades,  been  pecuniarily  sup- 
ported and  controlled  by  the  Kaiser's  intriguing  secret  service. 
Would  not  the  prospect  have  been  appalling?  How  could  we 
have  dared  to  hope  for  victory  over  Hunnism,  when  it  was  aided 
by  such  allies  as  that ! 

We  cannot  even  imagine  how  terrible  and  humiliating  such  a 
position  would  be.  We  should  be  forced  to  recognize,  too  late, 
that  our  whole  body  of  adult  educated  men  and  women  had 
had  their  ideals  molded  by  the  philosophies  of  Dernberg.  Our 
entire  population  would  be  receiving  its  daily  impressions,  in 
school  and  out,  through  the  eyes  of  Prussian  militarism. 

There  .could  be  no  anti-German  editorials.  The  news  would 
all  be  garbled  to  picture  Germany  as  the  aggrieved  innocent, 
as  all  our  conservative  press  now  depicts  commercialism.  There 
could  be  no  military  training  against  Germany  in  the  men's 
colleges,  no  student  automobile-drivers,  and  no  nurse-and-am- 
bulance  units  from  the  girls'  schools — except  such  as  aided  the 
enemy. 

Yet  such  a  situation,  inconceivably  helpless,  perilous  and 
humiliating  as  it  would  be,  is  not  one  whit  worse  than  that 


THE   PATH   BEFORE   US  823 

which  now  confronts  us.  For  now  that  we  have  identified 
commercialism  as  the  enemy  of  modern  civilization,  the  source 
of  all  our  unrest  and  instability  (with  its  unconsciousness  of 
the  fact  having  no  bearing  whatever  upon  the  fact  itself),  it 
simultaneously  appears  that  commercialism  controls  all  our 
universities  and  all  of  our  periodical  press! 

It  controls  our  universities  through  the  endowment-system. 
It  controls  our  periodicals  through  their  subsistence  upon  com- 
mercial advertising-matter,  rather  than  upon  subscriptions. 
And  in  each  of  these  directions  this  controlling  influence  is 
now  being  extended  acceleratingly,  beyond  any  possibility  of 
control  by  the  ballot. 

Educational  Reform. — All  this  prostitution  of  our  educational 
tools  is  fearfully,  menacingly  wrong.  We  must  have  universi- 
ties which  are  directly  in  touch  with  the  needs  of  the  people, 
rather  than  guided  by  that  spirit  of  aristocratic  tyranny  which 
always  accompanies  the  influence  of  money.  If  we  are  not  to 
have  a  revolution  of  blood,  dynamite  and  rapine  in  our  streets, 
we  must  first  have  one  of  methods  and  men  in  our  universities. 

Yet  the  only  step  needed  to  accomplish  this  result  auto- 
matically is  some  federal  action  requiring  all  educational  in- 
stitutions to  charge  for  their  tuition  its  full  natural  cost,  and 
no  more.  This  cost  must  include  a  margin  for  undivided 
profits,  and  from  this  profit  all  extensions  are  to  be  made. 
Gifts  may  not  be  accepted.  The  ethics  relating  the  college- 
president  to  the  wealthy  alumni  must  be  guarded  as  jealously 
as  those  of  a  judge  on  the  bench  toward  the  litigants. 

To  debate  the  ramifications  of  this  proposition  is  of  course 
impossible  here.  It  is  enough  to  say  that,  with  this  reform 
effected,  a  school  of  social  philosophy  must  arise  automatically 
which  is  competent,  not  necessarily  to  control,  but  at  least  to 
predict,  to  guide  and  to  forefend  us  from  cataclysm.  We  should 
then  have  a  scientific  authority  which  statesmen  and  legis- 
lators must  respect,  as  navigators  respect  astronomy. 

Indeed,  under  the  influence  of  such  a  science  legislators 
would  then  have  to  be  trained  and  licensed,  exactly  as  a  physi- 
cian must  now  be  certificated  by  a  medical  school.  We  de- 
mand this  of  the  physician  before  he  is  permitted  to  take  into 
his  hands  even  a  few  individual  lives.  Yet  we  now  permit 
mere  politicians,  ignorant  of  all  the  natural  and  social  sciences, 
to  pass  laws  which  affect  hundreds  of  millions  of  lives !  Is  it 


824  MODERN   ECONOMIC   TENDENCIES 

so  remarkable  that  we  should  experience  frequent  social  con- 
vulsions ? 

We  do  this  because  no  person  of  discretion  to-day  places  any 
faith  in  the  ability  of  the  existing  schools  of  sociology  to  do 
aught  except  confuse,  mislead  and  delay.  This  is  so  because 
our  universities  rely  upon  interest  and  dividends  for  their 
support,  because  they  think  that  they  now  possess  a  science  of 
social  control,  and  because  they  see  no  causative  social  force 
except  the  individual  psychology. 

We  are  a  long,  long  way  from  realizing  wherein  lies  true 
democracy,  or  why  we  do  not  now  possess  it. 

The  Greatest  Question  of  the  Day.— Yet,  finally,  after  offer- 
ing in  all  sincerity  these  two  suggestions  for  reform,  looking 
toward  the  only  conceivable  first  steps  in  any  gradual  abolition 
of  commercialism  and  the  cure  of  our  social  problem,  the 
author  now  considers  it  his  solemn  duty  to  raise  the  very 
serious  question  as  to  whether  either  of  these  suggestions  for 
freedom  of  speech  can  be  realized. 

This  is  very  far  from  being  said  as  a  joke.  It  is  the  grimmest 
of  earnest.  For  the  reader's  attention  must  be  turned  then  to 
face  the  awful  question:  If  these  elementary  reforms  be  un- 
attainable, what  does  it  mean? 

For  here  is  a  modest  test-case.  Freedom  of  speech  in  press 
and  college  is  certainly  an  elementary  right  to  be  expected  from 
that  democracy  which  assumes  to  lead  the  world  toward  political 
liberty.  It  is  certainly  the  very  first  pre-requisite  for  the  at- 
tainment of  any  deeper,  wider  and  more  vital,  but  also  more 
intricate,  reform,  such  as  the  cost  of  living,  or  the  right  to 
continuous  employment.  Yet  now  we  do  not  possess  this 
elementary  freedom  of  speech,  and  there  is  grave  doubt  whether 
we  can  attain  it! 

Therefore,  let  us  obtain  this  freedom  immediately;  or  else, 
failing  that,  let  us  learn  the  invaluable  lesson  which  failure 
must  teach,  namely,  that  we  now  wield  no  sovereign  control 
over  the  means  and  methods  of  expression  of  our  public  senti- 
ment. Also,  if  that  be  true,  that  we  have  already  allowed  to 
slip  from  our  grasp  our  only  weapon  against  the  aggressive 
growth  of  commercialism. 

Let  us  find  this  out  soon,  and  have  it  understood.  If  our 
organization  of  the  Ultimate  Consumers  can  accomplish  nothing 


THE  PATH  BEFORE  US  825 

more  than  this,  it  will  have  done  yeoman's  work  for  economic 
liberty. 

For  if  we  really  possess  none  of  these  rights  and  powers — 
if  we  have  not  now  the  ability  to  reform  by  rational,  gradual, 
peaceful  methods  even  these  minor  abuses  of  commercial  in- 
fluence in  college  and  press — then  we  surely  have  no  ghost  of 
a  chance  at  controlling  those  vastly  larger  and  more  powerful 
commercial  enemies  which  now  hide  themselves  behind  these 
delicate  skirtlike  ramparts.  Let  us  either  free  our  colleges  and 
journals  from  this  underhanded  grip  of  commercialism,  or  else 
let  us  confess  frankly — and  lay  our  plans  deliberately  upon  the 
fact — that  commercialism  is  already  stronger  than  the  popular 
will  of  "the  free  and  the  brave." 

For  unquestionably  commercialism  is  daily  growing  more 
powerful.  If  we  cannot  cage  it  now  we  shall  never  be  able  to 
do  so.  Take  most  careful  counsel  as  to  this.  It  is  the  biggest 
issue  of  the  day. 

This  warning  is  addressed  particularly  to  that  (quite  unin- 
tentionally) dangerous  class  of  public  opinion  which  believes 
that  the  social  problem  is  now  being  gradually  solved,  or  is 
capable  of  some  gradual,  peaceful  solution.  This  class 'is  ultra- 
dangerous  because  it  delays  until  too  late  its  recognition  of  the 
inevitable.  It  insists  upon  believing  that  the  fire  which  has 
spread  for  seventy-five  years,  up  to  yesterday,  will  go  no  further 
to-morrow — that  the  horribly  sizzling  slow-match  will  go  out 
before  it  reaches  the  magazine — until  there  has  been  forced 
from  fate  a  disproof  of  this  philosophy  in  the  form  of  ten 
million  sacrificed  lives,  and  untold  human  misery. 

We  repeat,  we  emphasize,  we  urge — it  is  time,  time,  TIME 
which  is  the  vital  factor  in  social  reform.  That  which  can 
be  done  peaceably  to-day  will  bring  revolution  if  delayed  until 
to-morrow. 

Recent  Social  Evolution. — The  unquestionable  facts  of  re- 
cent American  history  established  by  the  data  analyzed  by  this 
book  are  these: 

(1)  That  commercialism,  both  as  a  legal  institution  and  as 
a  popular  tradition  or  spirit,  is  a  purely  destructive,  retarding 
and  demoralizing  force  in  social  evolution.  It  is  not  a  sort 
of  individual,  different  from  the  common  run  of  American 
citizens,  which  is  to  blame ;  it  is  merely  a  class  of  occupations. 


826  MODERN    ECONOMIC    TENDENCIES 

(2)  That  commercialism  may  be  defined  briefly,  for  the  pur- 
poses of  summary,  as  the  owning  of  things  which  one  doesn't 
want,  because  someone  else  wants  them. 

(3)  That  there  is  no  department  of  modern  activity  now 
equally  large,  nor  to  which  is  being  devoted  so  huge  a  propor- 
tion of  our  economic  energy,  as  commercialism.     Although  we 
had  considered  ourselves  as  peculiarly  a  nation  characterized 
by  gigantic  development  of  factory-production  (including  in  this 
term  farming,  forestry,  fishing  and  transportation,  with  mining 
and  manufacture  proper),  yet  our  growth  in  devotion  to  com- 
mercialism far  overtops  both  this  and  also  the  second  line  of 
progress  supposed  to  be  peculiarly  characteristic  of  the  age, 
namely,  technical  and  scientific  attainment.     It  overtops  them 
in  rate  of  growth  not  only  when  either  is  taken  singly,  but 
when  they  are  combined. 

(4)  That  there  is  now  no  other  department  of  social  evolu- 
tion in  which  the  rate  of  growth  is  being  so  rapidly  accelerated 
as  is  the  case  with  commercialism.     This  is  the  indubitable 
sign  of  the  unavoidable  approach  of  a  crisis.     If  the  rate  of 
growth  were  declining,  as  we  advance,  gradual  reform  might 
be  surely  expected.     If  even  the  rate  were  remaining  constant, 
there  might  be  hope  of  some  new  aid  to  its  reversal  being  devised 
with  time.     But  where  the  rate  of  growth  is  steadily  and  in- 
creasingly accelerating,  there  can  be  but  one  termination  of 
the  process — cataclysm. 

(5)  That  this  accelerating  growth  of  commercialism  finds 
its  expression  in  three  dominant  directions,  all  of  them  de- 
structive, namely: 

(a)  The  migration  of  individuals  out  of  the  productive  oc- 
cupations into  the  more  lucrative  avocations  of  owning,  buying 
and  selling  things  which  the  owner,  buyer  or  seller  does  not 
want; 

(b)  The  endless  accumulation  of  our  per-capita  burden  of 
interest-bearing  securities,  with  other  forms  of  principal-valua- 
tion, upon  all  of  which  the  Ultimate  Consumer  must  pay  in- 
terest in  each  shop-counter  purchase; 

(c)  The  consequent  relentless  rise  in  average  prices. 

(6)  That  no  policy  yet  put  into  practice,  nor  any  even  sug- 
gested upon   paper,  has  been  competent  even   to   hold   down 
any  one  of  these  accelerating  symptoms  of  commercialism  to  a 
constant    rate    of    growth,    and    thus    prevent    their    complete 


THE  PATH  BEFORE  US  827 

domination  of  our  civilization.  Most  of  the  reforms  currently 
advocated  do  not  even  recognize  these  things  as  their  legitimate 
target.  Therefore  we  say  nothing  as  to  the  further  task  of 
arresting  this  growth  entirely,  and  then  reversing  it  into  a 
gradual,  and  ultimately  complete,  reabsorption  by  the  body 
economic.  In  the  light  of  past  and  recent  history  any  such  a 
process  is  inconceivable. 

(7)  That  nowhere  in  any  assemblage  of  educated  people, 
imbued  with  a  Christian  determination  to  find  a  just  solution 
for  the  economic  problem,  can  be  found  even  two  (outside  the 
Socialists)  who  agree  as  to  where  the  trouble  lies,  or  what  is 
to  be  its  remedy.  Everywhere  is  endless  disagreement,  even 
among  those  best  accredited  with  ability  to  see  clearly.  What, 
then,  is  the  hope  for  understanding  and  agreement  among  the 
masses  ? 

We  clamor  continually  for  better  education  of  the  people — or 
else  assure  ourselves  that  we  are  already  too  well  educated  to 
have  a  revolution !  Yet  we  disagree  totally  as  to  what  the 
people  should  be  taught ! 

Yet  this  fact  alone  spells  revolution.  For  revolution  occurs 
only  when  a  nation,  from  the  novelty  of  the  situation,  cannot 
agree  what  should  le  done  in  the  face  of  a  growing  crisis — and 
so  delays  action  until  explosion  has  become  nature's  only  pos- 
sible method  of  readjustment. 

Over  the  Top. — With  these  basic  facts  of  modern  social 
evolution  once  properly  supported,  as  has  been  done  above 
herein,  the  responsibility  of  the  student  ends  and  that  of  the 
man  of  affairs  begins.  Up  to  this  point  the  reader's  mind  has 
been  led.  From  this  point  forward  he  must  think  for  himself, 
before  he  acts;  and  he  must  act  promptly  and  decisively. 

But  most  people,  judging  from  every  past  crisis  of  history, 
would  much  rather  act  without  thinking.  They  not  only  prefer 
to  suffer  and  die,  but  to  do  so  actually  at  great  cost  of  physical 
exertion,  rather  than  to  avoid  the  crisis  by  timely,  incisive, 
courageous  thought. 

Now  the  issues  of  the  day  will  soon  give  them  a  fresh  chance 
to  exercise  this  option.  Whether  we  wish  it  or  not,  we  must 
now  all  enlist  in  the  growing  internal  economic  crisis.  We 
are  conscripted  by  fate. 

Those  among  our  readers  who  have  lived  through  the  in- 
tellectual training-camps  of  university,  trades-union  and  forum, 


828  MODERN   ECONOMIC   TENDENCIES 

or  have  heroically  endured  the  drill-tactics  of  all  the  statistical 
data  quoted  above,  until  this  page  has  heen  reached,  have  now 
traversed  the  last  communication-trench  of  scientifically  stated 
fact.  They  must  next  go  over  the  top,  with  their  lives  en- 
trusted to  their  ideas,  into  the  no-man's-land  of  civilization's 
forward  thrust  against  that  perennial,  ages-old,  multi-costumed 
enemy  of  liberty,  happiness,  stability  and  progress — autocratic 
special  privilege — but  now  appearing  in  a  quite  novel  disguise. 

For  this,  indeed,  has  ever  been  the  method  of  war's  ambush 
of  advancing  civilization.  The  Americans  of  1775,  or  the 
French  of  1789,  or  the  Northerners  of  1860  or  the  Europeans 
of  1914  have  never  recorded  in  history  their  possession  of  any 
clearer  insight  as  to  what  threatened  them,  than  do  the  sociolo- 
gists (professional  and  otherwise)  of  to-day.  All  of  these  issues 
of  the  past,  we  think,  must  have  been  perfectly  clear  to  their 
contemporaries;  but  it  was  not  so.  They  floundered  as  blindly 
into  the  trap  which  set  off  the  mine  as  we  are  doing  now. 

The  Prospects  for  Reform. — In  this  issue  now  rapidly  com- 
ing to  a  head  between  the  public  of  Ultimate  Consumers,  on  the 
one  hand,  and  the  commercial-autocratic  oligarchy  of  business- 
anarchy  on  the  other,  the  ideas  set  forth  in  this  book  may  not 
arouse  instant  enthusiasm,  but  they  will  endure  most  per- 
manently. Because  they  are  addressed  to  the  rights  and  poten- 
tialities of  the  as  yet  unorganized  millions  of  economic  sover- 
eigns, they  will  be  the  last  to  be  recognized  and  adopted. 

These  doctrines  attack  no  class  nor  group  nor  individual,  but 
condemn  only  wrong  doctrines,  systems  and  traditions.  They 
indict  institutions  rather  than  the  puppets  misled  thereby.  They 
appeal  to  no  partisanship,  but  rather  to  all  parties  and  classes. 
They  truckle  to  no  interests.  They  promise  no  immediate  nor 
easy  results. 

They  condemn  as  a  worse  than  futile  waste  of  time  all  such 
alluring,  plausible  plans  for  fragmentary  reform  as  the  "regu- 
lation" of  corporations,  the  income-tax  upon  swollen  fortunes, 
the  alleged  sharing  of  profits  with  wage-earners,  the  single  tax 
upon  land-values  only,  the  purchase  of  fragmentary  commercial 
properties  by  issues  of  government  bonds,  the  organization  of 
the  wage-earners  in  search  of  a  higher  wage — whether  to  be 
attained  peaceably  or  by  violence — or  the  fractional  organiza- 
tion of  even  the  Ultimate  Consumers  into  petty,  local,  half- 
commercial  and  half-socialist,  and  therefore  futile,  so-called 


THE  PATH  BEFORE  US  829 

"co-operative"  societies.  They  regard  the  enforcement  of  the 
federal  anti-trust  law  as  still  more  mischievous  than  any  of 
these,  because,  so  far  as  it  accomplishes  anything  at  all,  it  is  a 
step  backwards,  toward  that  decentralization  which  constitutes 
our  real  enemy. 

Instead,  these  doctrines  rest  solely  upon  reason  and  justice 
as  to  ethics,  upon  thoroughness  and  accuracy  as  to  science, 
upon  the  unity  of  all  economic  problems,  and,  as  to  politics, 
upon  the  automatic  inclusion  of  all  classes  of  individual  in 
the  non-partisan  organization  of  all  Ultimate  Consumers  for 
simultaneous,  penetrative,  effective  action.  While  completeness 
is  being  attained — until  a  majority  of  the  Ultimate  Consumers, 
united  in  purpose,  may  exercise  actively  their  inborn  economic 
sovereignty — this  organization  is  to  work  merely  for  public  edu- 
cation, and  not  attempt  impracticable,  incompetent  reforms. 

Modern  Patriotism. — Doing  all  these  things,  these  doctrines 
ask  of  the  citizen  that  highest  and  most  courageous  form  of 
patriotism,  namely,  to  act  before  the  crisis  has  become  acute, 
in  an  endeavor  which  lacks  the  zest  of  a  partisan  conflict. 
Doing  all  these  things,  these  doctrines  will  be  the  last,  and 
therefore  the  most  permanent,  to  be  adopted. 

God  grant  that  they  may  be  adopted  through  reason,  before 
the  situation  explodes,  rather  than  after  a  further  exhaustion 
of  international  civilization  by  bloodshed,  arson,  famine  and 
disease,  brought  on  by  simultaneous  internecine  strife  in  all 
countries  now  oppressed  by  commercialism.  For  such  has  been 
the  result,  in  every  past  crisis  of  history,  inevitable  from  delay. 

Wherever  a  people  has  wandered  gropingly,  timidly,  as  we 
are  doing  now,  through  a  series  of  half-hearted,  short-sighted 
social  nostrums — a  series  prolonged  as  long  as  anyone  can  sug- 
gest any  new  measure  inadequate  to  the  real  trouble — they  have 
always  reached  finally  those  doctrines  which  later  aftersight  has 
approved  as  right.  But  they  have  done  this  only  after  the 
painful  failure  of  every  other  experiment  conceivable.  Success 
has  been  attained  only  at  a  date  so  unwisely  postponed  that 
meanwhile  the  exploding  magazine  of  autocratic  power  had  been 
crammed  to  its  eaves,  before  being  detonated. 

True  Optimism. — But,  if  this  thoroughness  of  this  book's 
methods  may  have  been  disappointing,  in  its  drastic  overthrow 
of  comfortable  delusions  as  to  immediate  or  gradual  reform,  it 
has  brought  us  a  far  deeper  and  more  abiding  consolation. 


830  MODERN   ECONOMIC   TENDENCIES 

For  these  uttermost  conclusions  of  cold-blooded  economic  science 
— starting  from  the  just  premise  that  to  each  man  must  be 
conserved  that  which  he  produces,  and  guided  therefrom  by 
unfeeling  tables  of  statistics — have  landed  us  finally  at  a  realiza- 
tion that  the  bulk  of  those  ugly  defects  in  our  civilization  which 
we  had  supposed  to  be  due  to  man's  inherent  wickedness,  are 
really  the  manifestation  of  mere  faults  in  his  social  organization. 
And  social  organization  is  a  thing  which  can  be  changed  very 
rapidly,  without  awaiting  the  ages-slow  development  of  the 
individual,  and  without  that  cruelty  which  has  always  attended 
attempts  to  force  the  reform  of  the  individual,  for  the  sake 
of  others,  toward  certain  ideal  standards. 

If  this  study  has  landed  us  face  to  face  with  an  all  but  in- 
evitable world-cataclysm,  and  plunged  us  temporarily  into 
gloom  from  the  fear  thereof,  it  has  also  brought  us  the  assur- 
ance that  the  cataclysm,  if  it  comes,  will  lift  us  within  a 
decade  to  a  height  of  social  evolution  which  a  century  of 
misery,  unrest  and  debate  would  not  attain — into  an  economic 
democracy  knowing  no  congested  cities,  no  slums,  no  ugly  fac- 
tories, no  strikes,  no  involuntary  idleness,  no  white  slavery,  no 
impertinent  advertisements,  and  very  little  tawdry  display.  It 
will  give  us  cities  like  world's-fair  grounds,  surrounding  country 
as  cultivated  as  a  garden  (where  now  lie  waste  spaces,  untilled 
forests  or  unused  farms),  restaurants  of  quiet  excellence  (what- 
ever the  grade  of  price),  theaters  of  real  drama,  concerts  of 
real  music,  and  everywhere  falling  prices  for  all  commodities 
and  rising  estimates  of  all  human  worth.  Art,  science,  litera- 
ture and  craftsmanship  will  then  receive  what  now  goes  to 
intrusive  salesmanship  and  sordid  finance.  This,  if  it  cannot 
be  had  through  rational  foresight  and  courageous  action  in 
time  to  prevent,  is  worth  a  cataclysm. 

True  Social  Science  the  Handmaiden  of  Religion. — More 
than  that,  this  line  of  analysis  has  now  landed  us,  in  spite  of 
its  cold-blooded  start,  at  a  warm-hearted  corroboration,  in  our 
secular  platform  of  social  duty,  of  the  simple,  all-sufficient 
moral  rules  for  life  uttered  nineteen  centuries  ago  by  Jesus 
of  Nazareth.  For  this  secular,  scientific  platform  finds  us  our 
duty,  even  if  we  be  selfish,  among  the  unseen  multi-millions, 
instead  of  merely  in  justice  to  our  visible  neighbors.  It 
promises  us  inconceivably  greater  prosperity  than  now,  but  only 


THE  PATH  BEFORE  US  831 

when  each  has  agreed  to  embody  in  our  national  constitution 
his  stewardship  as  his  brother's  keeper. 

It  bids  us,  if  we  would  be  prosperous,  to  take  far  less  heed 
of  what  we  shall  eat  and  what  we  shall  wear,  but  far  more 
heed  of  what  our  unknown  fellowmen  are  to  do  in  those  lines. 
It  bids  us  incorporate  this  principle  in  our  national  economic 
constitution.  It  bids  each  of  us,  poring  over  our  ledgers  to 
count  our  gains,  to  remember  the  basic  law  of  life — that  no 
man,  not  even  the  Christ  on  the  cross,  can  save  himself ;  and 
that,  if  he  neglects  to  save  others,  he  will  surely  lose  himself — 
body,  purse  and  soul  together. 

The  lesson  from  this  study  bids  us  regard  all  the  flotsam 
of  our  great  cities  not  as  life  worthless  in  itself,  but  as  good, 
valuable  life  which  has  been  artificially  degraded.  It  bids  us 
welcome  each  additional  atom  of  life,  whether  of  slum-babe  or 
of  immigrant,  as  of  indubitable  economic,  as  well  as  spiritual, 
value  to  us  all.  It  bids  us  organize  our  economic  system  in  the 
same  spirit  in  which  our  every  hospital  has  been  organized — 
upon  the  principle  that  every  atom  of  life  is  invaluable. 

It  bids  us  teach  that  for  all  our  social  ills  no  individual 
nor  class  is  to  be  blamed.  Our  trying  situation  is  the  natural 
result  of  an  evolution  to  which  all  have  been  contributors,  in 
a  fluid  intermingling  of  causes  and  results  wherein  no  blame 
can  be  accurately  traced. 

These  facts  prove  that  the  uttermost  goal  of  material  science 
is  merely  to  corroborate,  by  its  translation  into  the  language 
of  exact  quantities,  applied  to  modern  problems,  those  maxims 
of  generous  hope,  love  and  faith,  toward  God  and  man,  which 
were  addressed  to  the  shepherds  and  fishermen  of  a  simple 
folk  of  long  ago.  If  it  has  staged  a  world-revolution  as  the 
next  act  in  the  human  drama  unrolling  before  our  eyes, .  it 
has  also  pointed  out  a  divine  purpose  of  great  good  toward 
all  mankind  as  the  stage-manager  behind  the  scences — a  good 
greater  than  we  can  now  picture  to  the  imagination.  The  Naz- 
arene  himself  predicted  the  downfall  of  Jerusalem,  then  re- 
garded as  the  holy  foundation  of  the  world. 

This  modern  Baconian  philosophy  teaches  that  the  old  in- 
dividualistic philosophy — holding  that  each  can  and  should 
look  out  for  himself,  and  therefore  basing  everything  upon  the 
psychology  of  the  individual — seeking  therefore  some  egotistical, 


832  MODERN   ECONOMIC   TENDENCIES 

self-conscious,  heroic  "superman"  as  alike  the  goal  and  the 
solution  of  all  man's  pathetic  strivings — is  now  as  discredited 
in  modern  scientific  sociology  as  it  was  nineteen  centuries  ago 
in  the  philosophy  taught  from  the  cross.  It  is  as  unamerican 
and  unchristian  as  it  is  distinctly  Teuton,  in  its  line  of  thought. 

Modern  invention,  enforcing  congregation  and  specialization 
to  the  last  degree,  has  now  compelled  us  to  be  collectivists  in 
fact,  whether  we  will  or  not — has  compelled  each  of  us,  most 
reluctantly,  to  work  in  some  degree  for  all.  But  as  yet  it  has 
accomplished  this  in  only  a  narrow,  subconscious,  short-sighted 
sense. 

Modern  science  should  teach  us  to  accept  that  fate  in  a  broad, 
willing,  intelligent,  far-sighted  way.  Modern  religion  should 
teach  us  to  welcome  it  lovingly — should  teach  us  that  a  so- 
called  Christianity  which  confines  its  charity  of  spirit  to  only 
those  whom  it  can  see,  and  its  faith  in  mankind  only  to  those 
who  do  what  we  think  they  ought  to  do,  is  a  crass  pharisaical 
selfishness.  It  should  never  let  us  forget  that  the  pharisee 
of  Jesus'  day  typifies  the  conservative  of  every  age.  Jesus  was, 
in  all  things,  a  radical. 

Modern  Sociodynamics — Evolution  versus  Edict. — A  cen- 
tury ago  Sir  Charles  Lyell  fought  the  good  fight,  against  the 
bigotry  of  his  day,  for  the  first  faint  recognition  of  the  modern 
concept  of  geology  as  an  evolutionary  science — for  a  natural 
concept  of  the  inanimate  world  of  mountain,  plain  and  sea  as 
a  thing  which  had  grown  naturally,  through  the  past  action 
of  forces  which  are  still  engaged  in  molding  it  daily  into  new 
forms.  Then  he  had  to  contend  against  the  established  super- 
stitious beliefs  of  that  time,  in  a  world  which  had  been  created 
completely  within  a  week,  by  the  edict  of  God,  as  contrasted 
with  the  modern  idea  of  slow,  interminable  growth,  guided  at 
all  times,  past  and  present,  by  that  immutable  natural  law 
which  forms  the  modern  concept  of  a  loving  God. 

Two  generations  ago  Darwin  and  Huxley,  in  England,  and 
John  Fiske  in  America,  were  fighting  the  parallel  battle  for 
the  modern  idea  of  the  evolution  of  the  world  of  animal  life — 
a  battle  really  started  by  Lamarck,  a  century  earlier — fighting 
the  active  opposition  of  Agassiz,  at  Harvard  (which  university 
exiled  its  graduate,  Fiske,  for  his  radicalism)  and  at  Yale 
that  most  exasperating  of  all  the  obstacles  to  the  progress  of 
civilization,  mere  passive,  indifferent,  mental  inertia. 


THE  PATH  BEFORE  US  833 

Thank  Heaven,  those  fights  have  now  been  won.  Virtually 
all  educated  men  believe  in  the  evolutionary  origin  of  the  world 
about  us,  in  both  its  inanimate  and  its  animate  individual 
aspect.  But  now  it  appears  that  the  long,  bitter  battle  must 
be  fought  all  over  again,  in  the  fields  of  sociology,  because 
virtually  all  educated  men  still  believe  that  society  has  received 
its  present  form,  and  can  continue  its  future  growth,  only  by 
the  operation  of  sheer  individual  edict,  sanctioned  by  incorpora- 
tion into  statutes,  but  untrammeled  by  supreme  natural  law. 

This  is  the  burden  which  we  have  inherited  from  our  past 
lack  of  even  political  liberty.  Our  fight  for  political  liberty 
has  been  so  dire  that  now  that  we  have  attained  it  we  believe 
that  it  has  solved  all  problems.  Because  our  social  edicts  now 
come  from  bodies  of  democratically  elected  representatives,  we 
believe  that  they  must  be  competent  beyond  question — that  they 
must  be  potent  to  prevail  over  all  obstacles,  whether  they  be  in 
accord  with  the  subconscious  natural  laws  of  human  association 
or  not. 

There  never  was  a  greater  mistake.  Our  progress  is  now 
being  paralyzed,  and  the  stability  of  our  entire  international 
civilization  threatened,  by  our  rigid  faith  in  the  narrow  idea 
of  a  society  molded  dogmatically  by  the  sovereign  edict  of  the 
people,  when  expressed  solely  through  political  channels.  That 
we  may  and  must  rely  upon  such  democratic  guidance  in  our 
economics,  before  we  may  find  peace,  is  the  lesson  of  this  book. 
But  it  is  also  its  emphatic  lesson  that  economics  and  politics 
are  independent,  incompatible  fields  of  energetics,  and  that  both 
are  subject  to  relentless  natural  law. 

Until  we  can  escape  from  that  superstitious  faith  in  the 
power  of  social  edicts,  when  unharmonized  with  those  huge, 
subconscious  forces  of  economic  evolution  which  now  overrule, 
suspend,  abrogate  and  reverse  the  intended  action  of  those 
edicts — until  we  can  escape  from  that  to  a  modern  concept  of 
social  growth  as  a  subconscious  result  of  mathematically  de- 
finable and  relentless  evolutionary  laws,  consonant  with  all 
other  laws  of  mass-action  and  form-evolution — we  are  doomed 
to  endless  social  turmoil,  conflict,  paralysis,  and  periodic  ex- 
plosion, with  their  unspeakable  misery  for  all  classes  of  in- 
dividual. 

The  paganism  of  the  first  century — worst  enemy  of  the  hap- 
piness and  progress  of  that  day — believed  in  a  world  of  planets, 


834  MODEKN   ECONOMIC   TENDENCIES 

clouds,  lightning,  trees,  etc.,  each  of  which  was  guided,  inspired 
and  moved  by  a  deity  which  acted  quite  by  whim,  unhampered 
by  any  law.  The  paganism  of  to-day,  peopling  our  brains  with 
a  crew  of  grotesque  fantasies  as  unreal  as  was  ever  evolved  by 
classic  superstition,  believes  in  the  equally  unhampered,  heroic 
autonomy  of  the  "unconquerable  superman"  within  each  one 
of  us,  as  alone  the  motive  power  and  guidance  upon  which 
modern  civilization  must  rely  for  the  solution  of  all  its  prob- 
lems and  the  conquest  of  all  its  tragic  and  pathetic  miseries. 
This,  they  believe,  is  therefore  the  thing  to  be  cultivated  at 
all  costs.* 

Yet  now  cold-blooded  science  unites  with  warm-hearted  re- 
ligion to  deny  all  life  or  power  to  any  such  a  graven  idol.  The 
whole  history  of  Christianity  and  science  combined  proves  its 
impotence.  Poor  helpless,  soulless  dream,  of  heroic  individual 
supremacy  over  life — a  dream  as  unable  to  fly  as  a  Pegasus,  as 
impotent  in  fight  as  a  unicorn! 

The  earlier  superstition  led  man  into  such  acmes  of  cruel 
lust  and  bloodshed  that  we  like  to  regard  them  as  now  long 
past  forever — or  so  we  did  before  1914.  The  second  super- 
stition has  led  us,  more  recently,  into  all  those  narrow  ideals 
of  self-salvation  rampant  from  John  Calvin  down  to  the  con- 
servative orthodoxy  of  the  latest  hour — producing  prigs  rather 
than  well-balanced  men,  and  staining  the  annals  of  the  church 
with  blots  of  pharisaical  self-righteousness.  Still  more  recently 
it  has  led  us  into  the  hideously  idealistic  Jcultur  of  the  Prussian 
militarists.  Now  finally  it  is  leading  us  into  the  standards  and 
philosophies  of  American  commercial  militarism — and  its 
natural  child,  conscious  anarchy — together  destined,  we  believe, 
to  prove  the  most  cruel  superstition  of  all. 

A  true  civilization — one  headed  by  standards  of  higher  educa- 
tion really  fit  for  the  responsibility  of  leading  such  a  civilization, 
and  competent  to  maintain  peace  and  prosperity — must  purge 
itself  of  all  these.  It  must  stand  unwaveringly  for  an  un- 
restrained social  evolution  which  walks  obediently  before  the 

*  This  cheap  popular  superstition  reverencing  the  ideal  of  a  ' '  super- 
man" is  one  of  the  most  poisonous  of  the  insidious  social  toxates  which 
we  have  derived  from  a  literature  written  and  published  for  dividends' 
sake.  In  the  sagging  of  literary  quality  ' '  all  the  profits  will  bear ' ' 
this  superman-idea  has  been  found  of  great  value  in  promoting  sales — 
a  species  of  autointoxication  from  which  not  even  the  most  worshipful 
of  our  dramatic  critics  has  been  able  to  preserve  himself  entirely. 


THE   PATH   BEFORE   US  835 

Christian  God  of  love  and  mercy  with  the  bold  courage  of  the 
martyrs,  and  humbly  before  His  immutable,  mathematical,  auto- 
matic laws  of  economic  evolution.  It  must  scourge  out  the 
impotent  arrogance  of  "superman"  individualism,  born  of 
education  by  rote  from  memorized  text-books,  equally  with  the 
license  of  those  who  change  money  in  the  temple  of  the  people's 
life-support. 

The  Dangers  Lurking  in  Profitable  Special  Privilege.— 
When,  in  another  volume,  to  be  entitled  "The  Evolution  of 
Social  Crises/'  we  shall  have  considered  the  dangers  from  which 
the  past  experience  of  nations  other  than  our  own  should  warn 
us,  it  will  appear  that  the  first  law  to  be  memorized  by  the 
student,  reformer,  statesman  or  sociologist — merely  in  order  to 
be  scientific  and  accurate,  as  well  as  just  and  wise — must  be: 
"Recognize  instantly  the  beginnings  of  any  autocracy  of  special 
privilege,  however  strange  in  form  it  may  be;  but  blame  no 
class  nor  individual  for  any  social  evil.  Eecognize  the  sole 
responsibility  of  merely  archaic  and  outgrown,  but  not  yet 
abandoned,  institutional  relationships,  for  all  collisions  between 
will  and  will  and  for  all  deformation  or  degradation  of  the 
human  ideal." 

In  this  way  make  every  effort  to  keep  down  to  its  minimum 
the  deadly  social  lag — the  delay  always  intervening  between 
the  demand  for  new  institutions,  created  automatically  by 
progress  in  population,  exploration  and  invention,  and  nature's 
resultant  automatic  re-adjustment  of  human  institutions  into 
harmony  therewith.  For  every  war  and  revolution  of  history 
has  been  due  merely  to  this  sociodynamic  lag.  The  continuous 
crime  against  society  which  is  chargeable  against  conservatism 
is  that  it  has  always  stood  for  the  increase  in  this  lag,  until 
explosion  blew  it  where  it  ought  to  have  gone  spontaneously, 
and  that  it  stood  there  in  the  name  of  private  profits. 

Modern  Christianity.— The  Christianity  of  the  first  century 
called  upon  man  to  purify  his  relationships  merely  with  his 
immediate,  visible  neighbors.  It  taught  him  that  he  must  not 
judge,  nor  blame,  nor  try  to  reform,  those  visibly  about  one; 
but  rather  to  love,  respect  and  trust  neighbor  and  self  alike, 
in  the  form  in  which  God  made  them.  It  taught  us  to  do  this 
in  spite  of  the  fact  that  neither  God,  neighbor  nor  self  often 
does  what  we  think  he  ought  to  do. 

But  the  Christianity  of  the  twentieth  century,  facing  vast 


836  MODERN   ECONOMIC   TENDENCIES 

populations  undreamed  in  the  days  of  Pilate,  calls  upon  man 
to  go  beyond  this  program  and  to  purify  also  his  formal 
relationships  with  myriads  of  distant,  unseen,  unknown,  inac- 
cessible neighbors — yet  neighbors  now  in  fact,  whose  daily 
happiness  he  now  affects  by  his  every  act  and  thought,  through 
the  agency  of  marvelous  facilities  for  communication  and  trans- 
portation, intricate  networks  of  trade,  and  international  sys- 
tems of  finance.  These  relationships  are  sometimes  embodied 
in  legal  statutes  and  written  constitutions;  but  just  now  those 
which  affect  us  most  are  embodied  in  the  unwritten  traditions 
of  economic  custom — in  our  faith  in  selfishness  as  the  only 
reliable  motive  in  business,  and  in  the  sacred  privilege  of  every 
man  to  buy  anything  in  sight  which  he  thinks  someone  else  is 
going  to  need. 

This  modern  Christianity,  even  when  confined  to  the  ethical 
and  moral  side  of  the  question  as  to  these  economic  traditions, 
teaches  us  not  to  judge  other  classes  of  society  than  our  own — 
not  to  blame  them  for  evils  for  which  they  seem  to  be  respon- 
sible, for  acts  which  seem  to  us  reprehensible — for  not  only 
they,  but  probably  we  also,  know  not  what  we  do.  It  teaches 
us  not  to  hope  to  improve  social  conditions  by  reforming  other 
people.  It  teaches  us  the  futility  of  individual  reform,  how- 
ever successful,  as  a  means  to  social  reform ;  for  it,  corroborated 
by  social  science,  teaches  that  social  faults  are  faults  of  mutual 
relationship,  and  not  faults  of  component  individuals. 

Thus  this  modern  Christianity  teaches  us  to  leave  individuals 
as  we  happen  to  find  them,  as  God  made  them — except  as  we 
may  be  able  to  make  them  happier,  by  the  million,  by  reforming 
our  subconscious  relationships  with  them.  It  teaches  us  that 
our  Caesarian  duty  toward  these  secular  relationships  is  to  exalt 
them  into  a  mutual  alliance,  through  mutual  faith,  under  the 
purest,  the  most  co-operative  and  least  antagonistic — and  in- 
cidentally the  most  efficient — arrangement  for  carrying  on  the 
daily  chores  yet  known  to  human  experience.  This  is  the 
factory-system. 

In  all  social  criticism  let  enlightened  hope  and  faith,  in 
both  God  and  man,  overcome  in  its  own  way — not  in  yours — 
that  bitter  pessimism  natural  to  ignorance  and  oppression,  on 
the  one  hand,  and  that  bitter  pride  inevitably  born  of  special 
privilege,  upon  the  other — the  two  great  obstacles  to  further 
social  progress,  soon  destined  to  try  again  the  souls  of  men  as 
only  the  sharpest  crises  of  past  history  have  tried  them.  In 


THE   PATH   BEFORE   US  837 

all  things,  have  faith  in  God  and  the  rights  of  the  Ultimate 
Consumer.  Then  keep  your  powder  dry! 

The  three  greatest,  successful  winners  of  revolutions  in  the 
past — Cromwell,  Washington,  Lincoln — were  all  God-fearing 
men,  who,  while  they  carefully  kept  their  powder  dry,  prayed 
for  divine  guidance  in  every  emergency.  Not  one  of  the  three 
foresaw  at  all  the  extremes  of  policy  toward  which  fate  was 
forcing  him.  Each  of  them  strove  in  vain  to  forefend  the 
inevitable  cataclysm  through  which,  when  it  came,  they  guided 
their  country  as  best  they  could. 

Each  of  the  three  was  bitterly  assailed,  before  success  had 
been  attained,  as  a  radical,  as  an  agitator,  and  as  the  creator 
of  those  faults  in  society  which  they  strove  to  cure  peaceably. 
Two  out  of  the  three  were  outlawed,  as  men  dangerous  to 
society.  The  third  was  assassinated.  Each,  after  it  was  all 
over,  was  canonized  in  public  esteem. 

The  one  figure  of  equal  power  and  prominence  in  history, 
but  who  failed  miserably  in  the  end,  Napoleon — the  one  man 
who  rivaled  the  pretensions  of  the  modern  Kaiser  in  his  em- 
bodiment of  the  heroic  superman — lacked  this  guiding  wisdom, 
sustaining  strength,  forward  help  and  wholesome  restraint — 
those  invaluable  aids  derived  from  a  belief  in  a  God  of  loving 
spirit  and  scientific  truth  as  the  power  which  guides  the 
universe. 


APPENDIX 


NOTE  1. — THE  MATHEMATICAL  LAW  OF  "CHARGING  ALL  THE 
TRAFFIC  WILL  BEAR" 

Let  K  ==  a  constant  cofficient  indicating  the  rate  of  social 
metabolism  prevalent  in  any  community;  that  is  to  say,  the 
amount  of  "community-nutrition"  resultant  from  a  given 
amount  of  exertion,  depending  upon  the  population,  health, 
topography,  state  of  the  arts,  degree  of  liberty,  etc.,  character- 
istic of  that  community,  all  of  which  will  remain  constant 
throughout  any  momentary  alteration  in  price  and  consequent 
volume  of  trade. 

Let  C  =  the  Natural  Cost  of  all  commodities  together,  in 
average  per  capita,  supposing  the  existence  of  a  complete  factory- 
system. 

Let  Q  =  the  quantity  of  Purchasing-Power  (in  money)  de- 
veloped from  any  given  supply  of  commodities,  through  reaction 
through  K. 

Let  N  =  the  Number  of  Units,  or  other  physical  measure,  of 
all  commodities  sold  in  absorbing  the  purchasing-power  Q. 

Let  x  =  the  proportion  of  Excess  of  Selling-Price  over  the 
Natural  Cost  C,  due  to  commercialism.  This  excels  x  includes 
all  sorts  of  non-productive  commercial  costs,  at  every  step 
between  absolutely  raw  material  and  the  finished  product  at 
the  point  of  Ultimate  Consumption.  It  may  consist  of  rent, 
interest,  dividends,  net  profits  or  other  form  of  money  trans- 
ferred bodily  from  the  producer  to  the  commercialist,  or  it 
may  consist  of  contributive  costs  which  nobody  gets,  because 
they  are  spilled  and  dissipated  in  commercial  conflict.  The  effect 
of  either  upon  the  volume  of  trade  is  the  same.  Both  act  as 
a  retardant. 


840  APPENDIX 

Let  I  =  the  Income  of  the  commercial  dealer,  middleman, 
capitalist,  etc.,  in  aggregate. 

The  number  of  units  sold,  N,  is  determined  by  dividing  the 
purchasing-power  Q  by  the  selling-price,  C(l-\-x).  The 
dealer's  net  income  /  is  found  by  multiplying  the  number  of 
units  sold,  N,  by  the  excess  on  each  unit  over  the  natural  cost, 
or  xC.  Hence 


and     N  = 


0(1  +x) 


The  problem  is  to  find  the  value  of  x  which  gives  a  maximum 
value  of  I  as  a  resultant.  This  problem  may  be  solved  under 
three  different  assumptions  regarding  the  law  of  reaction  of 
community-purchasing-power  to  community-nutrition,  which  is 
unknown.  But  virtually  all  possible  variations  of  this  law  will 
be  covered  by  the  three  following  assumptions,  namely,  that  the 
purchasing-power  varies  directly  with  either  the  nutrition  itself, 
or  with  its  square,  or  with  its  square  root;  or,  in  other  words, 
that  it  varies  inversely  with  either  the  first,  the  second  or  the 
one-half  power  of  the  price.  Stated  mathematically,  these 
assumptions  become: 


First  Assumption:      Q  — 
Second  Assumption:   Q  = 


1+x 
K 


i^ 

Third  Assumption :      Q  =  —r= 


Substituting  the  value  of  N  from  the  second  equation  in 
the  first,  above,  and  then  substituting  in  this  the  three  values 
of  Q  just  stated,  in  turn,  there  result  three  equations  for  /  in 
terms  of  K  (which  is  a  constant)  and  x,  the  varying  excess  of 
price  over  natural  cost.  Putting  the  first  derivative  of  7  in 
reference  to  x  equal  to  zero,  in  these  three  cases  in  succession, 
the  conditions  under  which  the  value  of  I,  or  the  income  of  the 
commercialist,  will  become  a  maximum  as  x  rises,  are  found 


THE   MATHEMATICAL   LAW 


841 


to  be  the  following,   in  terms   of  the  three   assumptions  re- 
spectively : 


EXCESS  OF 
PRICE 

Value  of  ^, 

Proportion  of 
N  to  £ 

PROPOR- 
TION 
f 

Assump- 
tion 

Value 
of  x 

(whether  in 
Profits  or 
Contributive 
Costs) 
OVER 
NATURAL 
COST: 
Per  Cent 

or  the 
proportion 
of  Actual 
to  Natural 
COMMU- 
NITY- 
PURCHAS- 
ING 
POWER 

or  the 
PROPOR- 
TION OF 
ACTUAL  TO 
NATURAL 
COMMU- 
NITY- 
NUTRI- 

of 
Total-Income- 
going-to- 
Commercial- 
ists  to 
NATURAL 
COMMU- 
NITY- 
INCOME 

1ION 

I 

I 

100 

0.50 

0.250 

0.250 

II 

I 

50 

0.44 

0.296 

0.148 

III 

2 

200 

0.58 

0.192 

0.385 

The  column  of  this  table  which  is  of  the  greatest  significance 
is  the  fifth.  This  gives  the  fraction  of  normal  to  which  the 
natural  life  of  the  community  has  been  reduced,  through  re- 
duction in  its  aggregate  rate  of  social  nutrition  relatively  to  its 
aggregate  productive  capacity,  by  the  commercial  practice  of 
"charging  all  the  traffic  will  bear,"  before  the  income  of  the 
person  doing  the  charging  has  reached  a  maximum,  and 
so  has  signaled  to  him  to  charge  no  more.  The  widest  probable 
range  of  assumption  regarding  the  unknown  factors  of  social 
life  leaves  us  a  choice  of  conclusion,  as  to  the  fraction  of  its 
natural  life  which  is  left  to  the  community  by  this  practice, 
which  ranges  only  from  about  thirty  per  cent,  if  we  le  optimists, 
down  to  nineteen  per  cent  if  we  le  pessimists. 

It  will  of  course  be  noted  that,  in  reviewing  the  history  of 
seventy  years  of  American  evolution,  the  characteristic  constant 
of  the  community,  K,  has  not  remained  constant.  Variations 
in  territory,  population  and  technique  have  altered  the  free- 
dom with  which  this  law  of  charging  all  the  traffic  will  bear 
has  operated.  But  in  this  fact  lies  no  hope  for  any  gradual 
escape  from  its  clutches ;  for  the  obvious  fact  is  that  the  gradual 
occupation  of  wild  lands,  the  gradual  congestion  of  population, 
and,  most  of  all,  our  marked  increase  in  technique,  with  the 
passage  of  the  decades,  have  all  conspired  to  remove  gradually 


842 


APPENDIX 


the  obstacles  from,  and  to  facilitate,  the  charging  of  all  the 
traffic  will  bear,  to  the  full  limit  signified  by  these  figures. 

The  last  column  is  of  a  significance  only  secondary  to  that 
of  the  fifth  column;  for  it  states  arithmetically  the  fact  that 
the  commercialist  is  guided,  in  his  guaging  of  what  the  traffic 
will  bear,  only  by  his  ledger.  He  looks  only  at  dollar  of  in- 
come, not  at  what  it  will  bring  him.  One  of  the  most  threaten- 
ing aspects  of  this  whole  problem  lies  in  the  fact  that  the 
commercialist  is  just  as  blind  as  is  the  wage-earner,  or  possibly 
more  so,  as  to  the  misleading  character  of  income  in  money, 
as  contrasted  with  income  in  purchasing-power. 

In  other  words,  while  the  commercialist  is  exaggerating  his 
income  by  more  intense  competition  he  is  raising  prices  against 
himself,  exactly  as  the  wage-earner  is  raising  prices  against 
himself  when  he  strikes  for  a  higher  wage.  But  herein  lies 
the  trouble  and  the  danger!  The  wage-earner,  for  his  part, 
is  physically  sensitive  to  a  limit  in  purchasing-power,  because 
he  is  at  all  times  "up  against  it"  as  to  obtaining  enough  com- 
modities for  bodily  comfort  and  other  personal  needs.  But  the 
commercialist,  on  the  other  hand,  has  to  attain  only  a  moderate 
degree  of  success  when  he  naturally  begins  to  lose  all  sight  of 
purchasing-power,  because  his  income  is  already  in  excess  of 
all  bodily  needs,  and  only  social  ambition  is  left  as  a  motive 
for  further  intensity  of  competition.  Indeed,  with  all  the 
larger  commercialists  even  this  motive  force  has  been  outrun. 
The  ledger  reveals  only  meaningless  figures,  which  serve  as 
counters  in  a  game  or  sport  which  gains  in  zest  as  it  leaves 
behind  the  slightest  possible  risk  of  personal  hardship. 

It  is  this  fact  which  constitutes  the  warning  to  the  student 
of  sociology  to  abandon  any  last  hope  of  any  gradual  ameliora- 
tion or  reversal  of  the  irresistible  growth  of  commercialism 
upon  us.  For  commercialism  stands  revealed,  by  the  few 
simple  figures  of  the  last  column,  as  one  of  those  institutions 
which  have  arisen  periodically  in  past  human  history  which 
lack  all  natural  warning  of  undue  growth.  Their  inherent 
nature  is  one  of  instability  of  equilibrium,  because,  as  they  pro- 
ceed, their  motive  force  grows  faster  than  the  consciousness  of 
resistance.  They  are  like  a  cane  balanced  vertically  upon  the 
finger-tip,  or  like  an  avalanche  starting  down  a  mountain-side, 
or  like  a  magazine  of  explosives  upon  the  setting  off  of  the 
first  detonating-cap — they  can  manifest  only  a  cataclysmic 


THE    ORIGIN   OF   BOLSHEVISM  843 

rushing  to  a  violent  extreme,  before  the  phenomenon  may  be- 
come arrested  in  a  new  condition  of  stable  equilibrium  which 
is  quite  the  opposite  of  the  old. 

It  is  not  the  function  of  this  present  volume,  however,  to 
trace  into  the  future  the  significance  of  this  present  fact.  That 
is  to  be  the  function  of  a  following  volume.  The  duty  of  the 
present  one  is  to  establish,  beyond  any  possible  question  or 
doubt,  the  train  of  economic  events  which  has  brought  us  to 
our  present  situation,  and  the  exact  nature  of  that  present  situa- 
tion, viewed  with  unblinking  eyes. 


NOTE  2. — THE  ORIGIN  OP  BOLSHEVISM  (MAY,  1919) 

The  new  word  bolshevism  has  arisen  since  this  book  was 
begun — indeed,  since  most  of  it  was  finished.  The  world's 
horror  over  the  situation  in  Russia  and  Germany  has  raised 
frequent  query:  Whence  arises  bolshevism?  Is  it  coming  to 
America? 

The  mystification  evident  in  these  queries  is  due  to  our 
traditional  insistence  upon  explaining  all  human  actions  in 
terms  of  individual  psychologies,  as  manifested  in  group- 
opinions.  Therefore,  because  we  have  faith  in  American  atti- 
tudes of  mind  we  refuse  to  believe  that  bolshevism  can  ever 
burst  forth  here. 

But  there  is  little,  if  any,  foundation  in  history  for  any  such 
an  explanation  of  revolutions  as  that.  Individual  sentiments 
do  not  stay  long  enough  in  any  one  attitude  to  explain  com- 
munity-actions. In  great  crises  public  sentiment  is  habitually 
turned  topsy-turvy  overnight,  again  and  again,  by  the  auto- 
matic progress  of  events  which  pay  no  appreciable  attention 
to  what  that  sentiment  may  have  been  at  any  one  moment. 

The  public  opinion  dominant  at  any  one  time  proves,  upon 
examination,  to  consist  far  more  in  what  the  train  of  events 
has  tossed  into  prominence  and  momentary  power,  while  op- 
posite views  are  condemned  to  obscurity,  than  it  does  of  any 
autonomous  supremacy  won  by  the  dominant  doctrines,  by  their 
own  inherent  ability  to  conquer.  It  is  only  the  slowly  attained, 
permanently  abiding  principles,  which  ultimately  become  ab- 
sorbed into  our  social  constitution,  of  which  the  latter  may  be 
said. 


844  APPENDIX 

Therefore  the  first  lesson  to  be  learned,  in  attempting  to 
understand  bolshevism,  is  that  the  ethical  standards  of  a 
country  are  the  result  of  its  physical  condition,  rather  than 
something  autonomous  with  the  free  will  of  the  people.  Given 
virtually  unrestricted  opportunity  and  all  but  certain  reward, 
as  in  America  until  recently — given  free  land,  boundless  fer- 
tility of  soil,  unity  of  government  within,  security  from  attack 
across  the  borders,  active  demand  for  labor,  lack  of  hampering 
caste  or  tradition,  and  bounteous  plenty  upon  every  hand — 
and  there  naturally  results  an  energetic,  fearless,  capable,  large- 
minded  people,  loving  liberty,  respecting  the  rights  of  others, 
magnanimous  and  careless. 

Given  on  the  other  hand,  as  has  been  the  case  in  continental 
Europe  for  a  thousand  years,  a  large  number  of  petty  govern- 
ments crowded  closely  together,  their  boundaries  seldom  fixed 
by  natural  obstacles,  but  rather  determined  solely  by  the  sway- 
ing arbitrament  of  battle,  and  the  only  form  of  society  which 
can  survive  at  all  is  a  military  dictatorship,  thinly  disguised  in 
the  form  of  feudal  fief,  dukedom,  monarchy  or  empire.  In- 
dividual liberty  is  inevitably  restricted,  in  order  to  permit  a 
social  organization  rigid  enough  to  withstand  the  constant 
menace  of  attack  from  without.  Special  rank  and  hereditary 
privilege  arise,  to  form  society's  only  tortoise-shell  against  in- 
vasion and  sack.  Absolutism  grows  inevitably.  Population 
expands  against  a  limitation  by  caste  rather  than  against 
physical  obstacles.  Existence  becomes  possible  only  upon  nar- 
row margins.  Ethical  standards  then  become  cautious,  un- 
'generous  and  arrogant  above,  servile  below,  and  grasping  and 
narrow  in  all  levels. 

Thus  (recalling  from  the  body  of  this  book  the  picture  of 
America's  growth)  as  there  has  grown  upon  the  free  America 
of  the  nineteenth  century  this  parasitical  autocracy  of  com- 
mercialism dominating  its  twentieth-century  life — an  autocracy 
as  hereditary,  expansive  and  throttling  as  any  which  ever 
burdened  Europe  in  the  past — and  as  our  population  has  simul- 
taneously spread  from  shore  to  shore  of  the  continent,  ab- 
sorbing the  freedom  of  the  soil,  a  gradual  growth  of  the  latter 
sort  of  ethics  must  have  become  superimposed  upon  the  former 
— the  ethics  which  we  are  so  proud,  and  so  erroneous  to-day, 
in  still  calling  "American." 

From  the  grinding  impact  thus  arising  through  congestion, 


THE   ORIGIN  OF  BOLSHEVISM  845 

free  ethics  are  being  pulverized  and  precipitated  into  de- 
generate principles.  //  the  reader  will  glance  back  at  Fig.  2 
(page  444)  or  Table  87  (page  44$),  displaying  the  degree 
to  which  commercialism  is  increasingly  absorbing  and  dissi- 
pating the  normal  economic  energy  of  the  land,  he  will  get 
therefrom  an  exact  picture  of  the  degree  to  which,  under  the 
cosm-ic  principle  of  the  conservation  of  energy,  material  or 
normal  socio-economic  energy  is  being  increasingly  transformed 
dissipatively  into  degraded,  discontented,  vindictive  ethics. 

Bolshevism,  as  a  philosophy,  is  the  direct  and  inevitable 
product  of  commercialism  as  an  institution.  Wherever  com- 
mercialism prevails,  and  to  whatever  degree,  bolshevism  is  being 
manufactured  thereby  to  equal  degree.  Because  commercialism 
is  more  actively  and  intensively  developed  in  America  than  in 
any  other  land,  this  country  will  increasingly  prove  to  be  the 
world's  chief  origin  of  bolshevist  doctrines.  They  are  to-day 
more  prevalent  in  New  York  City  than  in  Petrograd. 

How  then,  if  this  be  so,  is  it  that  Russia,  which  is  one  of 
the  least  commercial  of  the  better  developed  countries,  and 
Germany,  which  is  still  far  behind  America  in  this  respect,  are 
the  two  countries  afflicted,  while  we  remain  free? 

The  answer  is  twofold.  In  the  first  place,  the  situation  shows 
that  fluidity  of  all  economic  phenomena  which  was  so  frequently 
emphasized  in  the  body  of  this  book.  America  is  not  one 
economic  unit,  and  Russia  another.  To  a  large  degree  the  two 
interchange  economic  pressure.  The  discontent  of  the  Russian 
peasant  is  largely  manufactured  in  Chicago.  Every  traveler 
returning  from  Russia  brings  additional  evidence  that  the 
economic  pressure  in  the  Ural,  in  Silesia  and  in  Arizona  is  not 
so  far  apart,  except  where  the  temporary  stress  of  local  combat 
disturbs  the  equilibrium. 

The  second  explanation  is  that  in  both  Russia  and  Germany 
the  lid  is  off — blown  off  by  the  explosion  of  political  war! 
Here  it  is  still  on.1 

i  Note  in  this  connection  the  articles  concerning  Russia  published  by 
Mr.  H.  G.  Wells,  in  the  New  York  Times,  some  eighteen  months  after 
the  above  was  written.  He  says: 

''And  this  spectacle  of  misery  and  ebbing  energy  is,  you  will  say, 
the  result  of  Bolshevist  rule.  I  do  not  believe  it  is.  ...  Let  me  say 
here  that  this  desolate  Russia  is  not  a  system  that  has  been  attacked 
and  destroyed  by  something  vigorous  and  malignant.  It  is  an  unsound 


846  "APPENDIX 

Hence  let  us  lay  down  here  a  few  of  the  general  laws  govern- 
ing the  use  of  lids  by  societies,  and  the  etiquette  governing 
their  removal.  These  laws  cannot  be  properly  supported  here 
by  reference  to  history,  but  the  reader  is  recommended  to  take 
them  on  faith  in  their  excellent  foundation,  nevertheless. 

(1)  No  society  has  ever  suffered  appreciably  from  anarchy 
while  the  lid  remained  on.    It  is  only  when  something  else  has 
knocked  the  lid  off  that  an  ebullition  of  anarchy  is  released. 
It  is  only  when  the  governmental  structure  collapses  from  its 
own  inherent  weakness  or  instability,  or  through  foreign  war, 
leaving  in  its  place  a  formless  heap  of  debris,  that  anarchy 
enters — really  as  a  helpful  wrecker,  to  remove  the  last  vestige 
of  the  older  structure,  before  the  site  may  be  cleared  and  the 
foundations  sunk  to  a  safe  depth  for  the  erection  of  a  new 
fabric  of  law  and  order. 

(2)  No  lid  has  ever  been  knocked  off  by  the  pressure  of  dis- 
content from. below.     This  law  concerns  one  of  the  most  uni- 
versal misconceptions  of  the  past  history  of  social  crises. 

The  fact  that  it  was  not  the  peasants  of  1789  who  started  the 
French  Eevolution,  but  the  "Third  Estate" — the  conservative 
propertied  classes,  corresponding  with  the  Wall- Street  bunch  in 
America  to-day — has  already  been  emphasized  on  page  796. 
Within  five  months  thereafter  every  one  of  the  many  laws,  taxes 
and  customs  which  had  been  oppressing  the  peasants  so 
grievously  for  so  long  had  been  repealed.  The  revolution,  so 
far  as  it  concerned  the  overthrow  of  unjust  institutions  was 
concerned,  had  thereby  been  completed.  The  later  development 
of  the  revolution  added  nothing  in  the  way  of  freeing  the 
people. 

At  that  date  the  hideous  Reign  of  Terror,  which  alone  is  syn- 
onymous with  the  Revolution  in  the  average  educated  mind,  was 
still  four  years  forward  in  the  darkness  of  the  future !  The 
French  Revolution  was  no  more  mobilized  by  the  discontented 
peasantry  than  a  boiler-explosion  is  produced  by  the  man  three 
hundred  yards  away  who  eventually  gets  hit  by  a  piece  of  the 
shell. 

In  our   American   Civil  War,   it  was  not  the  negro-slaves 

system  that  has  worked  itself  out  and  fallen  down.    It  was  not  Com- 
munism which  built  up  these  great  impossible  cities,  but  capitalism. 
It   was   not   Communism   that   plunged   this   huge   creaking   bankrupt 
empire  into  six  years  of  exhausting  war,  it  was  European  imperialism. " 


THE   ORIGIN    OF   BOLSHEVISM  847 

who  started  it,  by  insurrection.  That  act,  indeed,  was  then  as 
commonly  feared  as  a  revolt  of  our  east-side  wage-earners  is 
feared  to-day.  John  Brown's  fiasco  was  staged  upon  the  ex- 
pectation that  that  was  the  way  things  were  going. 

But  not  so.  From  the  first  whisper  of  trouble  until  after 
the  war  had  been  lost  and  won,  the  negroes  never  rose.  On 
the  other  hand,  it  was  the  acts  of  the  slave-owners  themselves, 
who  (had  they  but  been  enabled  to  see,  by  the  possession  of  a 
science  of  sociology)  had  every  motive  to  avoid  pushing  matters 
to  an  issue,  which  started  the  Civil  War  which  forever  abolished 
negro-slavery  from  American  soil. 

Similarly  in  the  present  Great  War,  it  was  not  the  French, 
nor  the  Belgians,  nor  the  Serbians,  all  of  whom  had  had  reason 
for  generations  to  wish  the  abolition  of  Prussian  militarism, 
who  started  the  war  which  is  destined  to  free  Europe  from  that 
peril.  It  was  Germany  herself  who  took  the  initial  step. 

So,  in  our  present  growing  economic  crisis,  there  is  not  the 
slightest  danger  of  any  degree  of  discontent  on  the  part  of  the 
wage-earners,  whether  manifested  by  a  general  strike,  or  by 
sabotage,  or  by  other  form  of  anarchy  or  bolshevism,  ever 
breaking  forth  effectively,  so  long  as  our  present  commercial 
system  remains  stable. 

For  our  present  government,  be  it  remembered,  is  not  one  in 
reality  formed  of  political  constitutions  and  statutes,  as  we  so 
fondly  believe,  but  one  founded  upon  and  supported  by  com- 
mercialism. Therefore  it  is  only  when  commercialism  has 
collapsed  from  within,  carrying  down  with  it  temporarily  our 
political  government  which  we  have  founded  thereon,  that  the 
American  lid  will  be  off,  and  American  bolshevism,  of  which 
we  possess  more,  however  securely  bottled  up  now,  than  Russia 
has,  will  burst  forth — temporarily  overwhelming  us  beyond 
control. 

(3)  Every  lid  falls  off  "of  itself"  through  the  apparently 
insane  but  actually  automatic  acts  of  those  most  interested  in 
keeping  it  on.  Thus  it  was  George  III,  quite  densely  ignorant 
of  what  he  was  doing,  who  provoked  to  revolt  his  loyal  American 
colonies,  converting  Washington  from  a  consistent  royalist  into 
an  unconquerable  rebel.  It  was  Louis  XVI,  equally  ignorant 
of  what  he  was  about,  who  reconvened  the  long  disused  French 
parliament,  in  1789,  which  was  eventually,  in  its  ultimate  form, 
to  dethrone  and  execute  him.  It  was  the  South,  in  America 


848  APPENDIX 

in  1861,  which,  believing  that  the  North  would  not  fight,  fired 
the  first  shot — on  Fort  Sumter — and  even  at  that,  we  are  told, 
the  act  was  unauthorized  by  the  Confederate  government.  In 
times  like  that  the  greatest  of  men  become  puppets  in  the  play 
of  gigantic,  uncontrollable  social  forces. 

It  was  William  Hohenzollern  who  voluntarily  invaded  Bel- 
gium, thereby  crystallizing  into  unity  the  entire  civilized  world 
against  him — the  very  result  which  he  least  intended  to  bring 
about.  And  it  was  President  Wilson,  who  up  to  December, 
1916,  had  acted  as  if  there  were  no  chance  of  America's  enter- 
ing the  war,  who  landed  two  million  men  in  France,  defeated 
the  German  armies  and  led  the  nations  in  the  formation  of 
a  world-government — an  act  totally  remote  from  his  conscious- 
ness but  two  short  years  before. 

So,  in  regard  to  our  present  growing  economic  crisis,  if  the 
lid  ever  falls  from  American  commercialism,  to  the  precipita- 
tion of  a  world-revolution,  it  will  be  the  commercialists,  and  not 
the  masses,  who  push  it  off.  At  present  these  commercialists 
are  doing  everything  in  their  power  to  push  the  lid  toward  the 
edge.  If  prices  continue  to  rise  revolution  is  inevitable;  and 
if  the  commercialists  do  not  control  prices,  no  one  does. 

All  of  their  acts,  it  is  true,  are  as  subconscious  of  the  in- 
evitable result  as  were  any  of  those  just  quoted  from  history; 
but  they  are  none  the  less  effective  for  all  that.  The  com- 
mercial lid  is  sure  to  go,  and  in  the  near  future. 

(4)  The  final  conclusion  from  all  these  considerations,  bear- 
ing upon  the  guidance  of  a  nation  previously  to  the  occurrence 
of  explosion,  is  that  it  is  not  Bolshevism  nor  anarchy  which  is 
to  be  feared,  or  guarded  against.  It  is  explosions  which  knock 
off  social  lids. 

Any  nation  which  once  allows  an  autocracy  of  undeserved 
special  privilege  to  finct  lodgment  within  its  system  may  expect 
to  see  that  autocracy  grow  and  grow,  without  regard  to  growing 
protests  against  its  inequities,  until  it  explodes  from  internal 
stress.  And  any  country  which  thus  allows  an  autocracy  to 
explode  upon  its  hands  will  find  some  portion  of  its  lid  blown 
off  thereby. 

Any  country  which  thus  allows  its  lid  to  be  blown  off,  by 
accumulation  of  neglected  inequity,  may  be  sure  of  finding, 
regardless  of  its  degree  of  intelligence  or  previous  traditions 
of  respect  for  law,  an  ample  stock  of  bolshevism  ready  to  burst 


THE   ORIGIN   OF   BOLSHEVISM  849 

forth  through  the  social  fissures  thus  created.  But  every  nation 
which  jealously  and  successfully  guards  itself  against  inocu- 
lation by  the  germs  of  special  privilege,  taking  antiseptic 
measures  before  they  have  had  a  chance  to  gather  power,  will 
never  suffer  from  anarchy  in  its  lower  levels  of  society. 


INDEX 


Abolition  of  Property.    See  Prop- 
erty, 52 
Absorption  of  Huge  Fortunes,  753 

—  of  Securities,  262 

Academy  of  Political  Science,  808 

Accelerated  Growth  of  Commercial- 
ism. See  Commercialism,  Growth 

Accident-Insurance,  115 

Accumulation  of  Wealth.  See 
Wealth 

Activities  vs.  Individuals,  128,  142, 
152,  188,  745 

Administration  of  Property,  345 

Adversity  and  Life,  250 

Advertising,  161,  235,  344,  347, 
350,  354,  498,  500,  502,  504,  506, 
782,  785,  789,  791 

Aesthetics.  See  Art,  Ethics,  Eco- 
nomics and  Ethics,  and  Charg- 
ing All  the  Traffic  will  Bear 

Agricultural  Implements,  24,  375, 
516 

Agriculture,  3,  359,  361,  370,  392, 
412,  432,  448,  545 

Air-Brake,  Economic,  480 

Aldrich  Report  on  Prices,  526 

Aluminum,  385 

America,  Colonial,  6 

—  in  1815,  3,  8 

—  in  1850,  398 

American    Academy    of    Political 
Science,  808 

—  Civic  Consciousness,  703,  714 

—  Civil  War,  704,  751,  777 

—  Economic  Evolution.     See  Evo- 

lution, 148,  188 

«—  History,    Chapter   I,    148,   188, 
703,  751 


American  Socialism,  732,  737 
—  Sociological  Society,  805 
Analysis,  Economic,  372,  442,  481 
Anarchy,   144,   148,  326,  380,  424, 

427,  436,  439,  473,  483,  510,  613, 

619,  639,  669,  677,  682,  728,  819, 

821,  846 

Annalist,  The,  667,  669,  670 
Antagonism,  Economic,  166,  168 
Appliances.      See    Unemployment. 

Inanimate,    130,   196,  465 
— ,  Multiplication  of.     See  Expan- 
sion 

Aristocracy,  592 
Art    under    Commercialism.      See 

Ethics,    Economics    and    Ethics, 

416,  422,  425,  498 
Arts,  Crafts  and  Sciences,  404,  432 
AUTHORITIES:  225,  268,  275 

Aldrich  Report  on  Prices,  526 

Am.  Academy  of  Political  Sci- 
ence, 808 

Am.  Sociological  Society,  805 

Annalist,  The,  667,  669,  670 

Assoc.  for  Improving  the  Condi- 
tion of  the  Poor,  380 

Black,  Hon.  F.   S.,  382 

Blauvelt,      Comptroller      Illinois 
Central  R.  R.,  269 

Bogart,  3,  4,  19,  23,  47 

Boublikoff,  Alexander,  744 

Bowley  on  Wages,  443 

Bradstreet,   511,   526,   658,  663, 
667 

Brooks,  Franklin,  709 

Callender,  Prof.,  643 

Cannon,  James  J.,  121 

Carey,  Henry  C.,  19 


851 


852 


INDEX 


AUTHORITIES  (continued) 

Carnegie,  Andrew,   107 

Case,  J.  Herbert,  120 

Census,  U.  S.,  357,  387,  443,  451, 
495,  623 

Clarke,  Prof.,  542 

Collier's  Weekly,  369 

Commercial  and  Financial  Chron- 
icle, 666 

Condorcet,  1,  697 

Dewey,  Prof.,  443,  542 

Evelyn,  Sir  George,  539 

Federal  Bureau  of  Labor  Sta- 
tistics, 628 

Fisher,  Prof.  Irving,  284,  298, 
301,  303,  306,  461,  526,  535, 
542 

Food  Commission,  New  York 
State,  513 

Gardner,  Vice-Pres.  Chicago  & 
Northwestern  Ry.,  273 

Geographical  Review,  684 

George,  Henry,  202 

Gilchrist,  Charles  A.,  692 

Goodnow,  Prof.,  542 

Griffith,  James  B.,  122 

Hayes,  Prof.,  217,  805 

Hepburn,  A.  B.,  88 

Herald,  New  York,  92,  500,  683, 
687 

Hill,  James  J.,  103,  322,  549 

Howard,  Prof.,  88 

Howe,  Robert,  80,  83 

Illinois  Central  R.  R.,  225,  268 

Ingle,  William,  76,  86 

Interstate  Commerce  Commis- 
sion, 225,  268,  309,  447,  448, 
451,  463 

Journal  of  Commerce,  New  York, 
107,  464 

Journal  of  the  Statistical  So- 
ciety, 443 

Juglar,  Clement,  657 

Kennedy,  Prof.,  542 

Kuczynski,   Dr.,   on  Wages,  443 

Lane,  Secretary,  718 

Laughlin,  Prof.,  539,  542 

Layton  on  Prices,  526 

Literary  Digest,  107 

Mail,  New  York  Evening,  505 


AUTHORITIES  (continued) 

Mellen,  Charles  S.,  313,  442 
Metropolitan  Life  Ins.  Co.,  628 
Morgan,  The  late  J.  P.,  314 
Mulhall  on  Prices,  525,  552 
Nearing,  Scott,  692 
Neuhaus  on  Wages,  443 
North  American  Review,  102 
OutlooTc,  The,  105 
Paish,  Sir  George,  96 
Park,  Vice-Pres.  Illinois  Central 

R.  R.,  268,  309 
Patten,  Prof.,  542 
Planck,  Prof.,  643 
Poincare",  Prof.,  643 
Public  Ledger,  Philadelphia,  316 
Pujo  Committee,  91 
Quarterly  Journal  of  Economics, 

657 
Railway-Age   Gazette,   313,   442, 

443,  663 

Rice,  George  S.,  683 
Ripley,  late  Pres.  Santa  Fe  Ry., 

275,   309,   324 
Robitzek,  Justice,  243 
Rooney,  J.  J.,  543 
Roosevelt,  Theodore,  704 
Rubinow,   Dr.   I.  M.,   114 
Ryan,  John  D.,  670 
Sage,  Russell,  103 
Schwab,  Charles  M.,  103 
Scientific  Monthly,  692 
Seligman,  Prof.,  542 
Shonts,  Theodore  P.,  683 
Soddy,  Prof.,  643 
Sombart,  Werner,  361 
Spahr,  Dr.  C.  B.,  447,  692 
Stevens,  Albert  C.,  657 
Sun,  New  York,  494,  500 
Taussig,  Prof.,  542,  549 
Thurber,  F.  B.,  103 
Thurston,  Prof.  R.  H.,  9 
Times,  New  York.    See  Times 
Tribune,  New  York,  340,  500 
Veblen,  Prof.,  518 
Wall  Street  Journal,  667 
Watkins  on  Wealth,  459 
Webster  on  Textile  Costs,  23 
Wildman,  Prof.  J.  R.,  101 
Wood  on  Wages,  443 


INDEX 


853 


Author's  Estimates,  404,  432,  473 

—  Point  of  View,  711,  733 
Autocracy     vs.     Democracy.       See 

Economic,  352,  493,  617,  828 
Automatic    Social    Involuntariness. 

See  Social  Subconsciousness 
Automobiles,  19,  428,  518,  690 
Averages,  Misleading,  366 

Back  to  the  Land,  370,  412,  448 
Ballot  vs.    Economic  Forces.     See 
Economics    and    Politics,    Func- 
tions 
Bank-Capital,  111,  123 

—  Clearings,  111,  123,  662 

—  Deposits,  111,  465 

—  Dividends,   111 

—  Failures,  661 

—  Loans,  111,  465 

—  Profits,  111 

—  Surplus,  111,  465 

Banks  and  Banking,  76,  112,  300, 

345,  653,  655 

— ,  History  of,  80,  112,  465 
Basic  Economic  Contrast,  44,  51, 
53,  62,  99,  117,  127,  129,  147, 
156,  160,  167,  171,  184,  390, 
404,  409,  419,  453,  456,  467, 
469,  474,  519,  547,  588,  606, 
612,  618,  653,  712,  743 

—  Law  of  Unemployment,  599,  633 
Beans,  374,  478 

Beef,  376 

Bellamy,  Edward,  711 
Betterments.     See  Expansion,  271 
Birthright,  Our  Economic,  729,  730 
Bitterness.     See  Discontent,  Social 

Philosophy 

Black,  Hon.  F.  S.,  382 
Blauvelt,  Mr.,  Comptroller  Illinois 

Central  R.  K.,  269 
Blood,  Circulation  of,  31 
— ,  Social  Life-,  714 
Blunder  of  1840,  33,  297 
Board  of  Trade,  144,  346 
Body-Economic,  467,  579 
Bogart,  3,  4,  19,  23,  47 
Boiler-Plate  Newspapers,  497 
Bolshevism,  622,  639,  670,  710,  744, 

756,  843 


Bonds,  109,  123,  254 

Borrower,  197 

Boublikoff,  Alexander,  744 

Bowley  on  Wages,  443 

Boycott,  346 

Bradstreet,  511,  526,  658,  663,  667 

Brake,     Commercialism     a,     upon 

Progress,  292,  480 
Bribery,  492 
Brooks,  Franklin,  709 
Buchanan,  President,  704,  719 
Building-Association,   112 
Business,  226,  234,  705,  766 
Businessmen    as    Authorities    upon 

Economics.     See  Authorities 
Businessmen 's     Inconsistency,     53, 
69,   129,   136,   144,   150,   155, 
156,  169,  175,  187,  284,  349, 
439,  731,  783 

—  Responsibility,  383 

Butler,  Pres.  Nicholas  Murray,  802 
Butter  and  Cheese,  374,  478 
Buying,  344,  406,  513 

Canals,  6,  11,  14,  465 

Cannon,  James,  J.,  121 

Capital.      See    Capitalism,    Credit, 

Valuation,  111,  123,  213,  507, 

516 

—  and  Labor,   53,  471,  507,  591, 

598,  602,  605,  612,  614,  672, 

737,  739,  749 
Capitalism,  111,  123,  213,  259,  293, 

310,  776 
— ,  Origin  of,   259,   265,   280,   293, 

305 

— ,  Passive  and  Active,  281 
— ,  Small,  333 
Capitalist,  53,  129,  144 
Capitalist's    Views    upon    Capital- 
ism.   See  Authorities 
Capitalization,  90,  273,  317,  516 

—  and  Cost  of  Replacement,   106, 

225,  258,  265,  516 
Carey,  Henry  C.,  19 
Carnegie  Steel  Co.,  107 
Case,  J.  Herbert,  120 
Caste  in  Industry,   132,   134,   146, 

592 
Cataclysm.    See  Crises,  Revolution 


854 


INDEX 


Catalytic,  71,  125,  570,  642 

Cattle,  375 

Causes,  Social.  See  Social  Subcon 
sciousncss 

Cement,  385,  484,  716 

Censor,  Economic,  782,  789 

Census,  U.  S.,  357,  387,  443,  451, 
495,  621,  697 

— ,  Massachusetts,  443 

Centralization  vs.  Decentralization, 
113,  147,  150,  427,  507,  509,  511, 
513,  516 

Chamber  of  Commerce,  144,  346 

Charity,  338,  340,  391 

Cheap  Standards  of  Commercial- 
ism. See  Economics  and  Ethics 

Cheese  and  Butter,  374,  478 

Chicago  &  Northwestern  Ky.,   273 

Christianity,  830,  833 

Circulation,   Economic,   599,   619 

— ,  Monetary,  114 

—  of  the  Blood,  31 
Circulating  Medium,  72,  76,  81,  85, 

87,  97,  110,  330,  569,  571, 

621,  651,  655,  669,  714 
based  upon  General  Wealth 

rather  than  Gold,  98,  120, 

702 

Cities,  362,  365,  412,  639,  683,  771 
Civic    Consciousness,    Evolution   of 

American,  703,   714 
Civil  War,  American,  704,  751,  777 
Civilization,  30,  125,  295,  353,  412, 

688,  830 
— ,  Latent,  183,  330,  410,  477,  556, 

637 

— ,  Our  Patent-Medicine,  295 
— ,  Treason  to.    See  Treason 
Clarke,  Prof.,  542 
Class-Action,  679,  755 

—  Dominance,  590,  673 

—  Struggle,   737,  739,  749 
Classification   of   Credit-Forms,   84 
—  of  Occupations,  390 
Clearing-House,  New  York,  662 
Clothing.      See    Textile,    Fashions, 

392,  414,  432 
Coal,  329,  385,  478 
Collapse,   263,   653,   669,  695,   714, 

750,  752,  777,  845,  847 


College,  Liberty  in  the,  782 
Collier's  Weekly,  369 
Colonial  Industry,  3,  5 
Colson,  Clement,  443 
Commercial     Anarchy.       See     An- 
archy 

—  and  Financial  Chronicle,  666 

—  Authorities.     See  Authorities 

—  Combat,  396,  432 

—  Credit,  67,  71,  99,  111,  213,  314, 

331 

—  Duplication,  49,  53,  140 

—  Efficiency,  274 

—  Failures,  659,  661,  669 

—  Inefficiency,  118,  129,  274,  408, 

662 

—  Initiative,    135,    207,   208,   211, 

265,  324,  779 

—  Militarism,   176,   191,  355,  358, 

373,  390,  416,  429,  434,  474, 
523,  555,  567,  701,  708 

—  Munitions,  390,  396 

—  Non-Combatants,  434,  479 

—  Occupations,  164,  188,  391,  396, 

406 

—  Oligarchy,  355 

—  Propaganda,  209,  230,  267,  790, 

822 

—  Property,  Volume  of,  461 

-  Eisk,  209,  256,  282,  460,  462 

—  Stipends,  442,  453 

—  Tourney,  174 

-  Waste   of   Transportation,  346, 

410,  426 

-  Wastes  which  Escape  Enumera- 

tion.   See  Omitted  Losses 
Commercialism,   62,  127,  149,   159, 
164,  188,  191,  195,  233,  310, 
350,  387,  391,  396,  402,  406, 

411,  420,  424,  432,  458,  474, 
513,  534,  600,  701,  705,  744, 
767,  784,  789,  792,  825 

—  Aggregate,  432,  458,  474 

—  and  Art,  422,  425 

—  a    Brake    upon    Progress,    292, 

480 

,  Contributory,  166 
— ,  Cumulative     Nature     of.      See 
Commercialism,  Growth   of 


INDEX 


855 


Commercialism,  Definition  of,  127, 
164,  166,  188,  886 

—  vs.   Democracy,   566,    591,    614, 

669,  677,  679,  695,  700,  707, 
712,  714,  718,  721,  727,  778, 
789,  814 

—  Dominates  Production,  272,  350, 

403 

— ,  Economic  Turbulence  due  to, 
380,  424,  548,  636,  660 

—  in  Embryo,  129,  167 

• — ,  Expansion  of.  See  Commer- 
cialism, Growth  of 

— ,Goal  of,  238 

— ,  Growth  of,  149,  264,  391,  402, 
437,  474,  520,  523,  569,  748 

— ,  Indicators  of,  521 

—  and  Journalism,  354,  370,  491, 

503,  782,  784,  788 

—  vs.  Life,  165,  177,  247,  251,  338, 

423,  472,  492,  615,  617,  682, 
831 

—  vs.  Loyalty,  711 
— ,  Normal,  319 

—  and  Peace,  189,  564 

—  and  Public  Ownership,  698 

— ,  Standards  of,  244,  247,  339, 
415,  420,  422,  424,  491 

—  and  Surplus,  261 

—  and    Technical    Progress,    149, 

387,  403,  435,  487,  520,  566 

—  and  Trade,  233,  350 

—  and    Unemployment,    584,    600, 

636 

—  and  War.    See  War 

—  vs.  Production.     See  Basic  Eco- 

nomic Contrast,  404,  456,  469, 
474 

—  vs.  Socialism,  297 

—  vs.  Wilderness,  292 
Commune,   French,    79,   558,   650 
Communication,  3,  6,  8,  20,  22,  28, 

159,  363,  394,  432,  484,  489,  521 
Community-Nutrition.      See    Food, 

Life-Support,  238,  470 
— ,  One-Hundred-per-Cent,  587 
Energy.   See  Social  Energetics, 

Credit,  Life-Support 
Competitive  Wage-System,  596,  602 


Competition,  49,  53,  148,  176,  234, 

325,  406,  743,  770,  772 
— ,  Cost  of.    See  Cost 

—  the  Death  of  Trade,  241,  670 

—  and    Economic    Evolution,    235, 

325 

Condorcet,  1,  697 

Confederate  States  of  America,  79 

Confiscation  of  Property,  52,  109, 
679,  702,  729,  766,  772 

Conflict,  Inevitable.  See  Eevolu- 
tion 

Confusion  Profitable  under  Com- 
mercialism, 424 

Congestion,  168,  362,  412,  428,  639, 
683 

—  and  Transit-Facilities,  684,  687, 

689,  771      . 
Conservation,    25,    157,    329,    382, 

670,  786 

Conservatism,  430,  835 
Consolidation,  29,  147,  516 
Consumer.    See  Ultimate 
Consumeration,    723,    760 
Consumerism,  723,  731,  740,  760 
— ,  Incomes  under,  767 

—  vs.  Socialism,  740 
Consumption.       See     Purchasing 

Power,  Production,  Ultimate 

Contributory  Commercialism,  166, 
744 

Control,  Social.  See  Social  Con- 
trol, Social  Subconsciousness 

Co-operation,  72,  153,  731 

Co-ordination,  64 

Copper,  385,  478 

Corn,  374,  478 

Corruption,  212,  763,  765 

Cost,  Natural,   137,   184,  277,  793 

—  of      Commercial      Competition, 

163,  168,  176,  198,  279, 
458,  469,  474,  513,  770, 
784 

Living.     See  Price,  524 

-  Eeplacement,  106,  225,  258, 

265,  516 
Cottage-System    of    Industry,    45, 

127 
Cotton,  8,  10,  374,  478 


856 


INDEX 


Cowardice,  Intellectual,  2,  169,  695, 

757,  778,  793,  805,  806,  809 
Craft,    Love    of.      See    also    Arts, 

Crafts  and  Sciences,   171,  633 
Credit,  49,  65,  71,  80,  86,  99,  100, 

111,  213,  289,  314,  331,  587, 

648,  702,  752,  757 
— ,  Expansion  of,  90,  213,  569 
— ,  Factory-System,  49,  65,  67,  99, 

213,  289,  587,  752 
— ,  History  of,  80,  100,  111 
— ,  Ideal,  125 
— ,  Non-Transferability     of,      745, 

757 

—  and  Patriotism,  554 

—  and  Eepudiation,  79 

— ,  Transformative  Power  of,  78, 
558,  650 

—  and  Unemployment,  619 

Instruments,  73,  84,  125,  331, 

569 

Crime,  244,  604 

Crises,  435,  648,  653,  678,  690, 
696,  715,  750,  796 

Criterions,  Economic,  41,  43,  66 

Cumulative  Economics.  See  Com- 
mercialism, Growth  of,  261,  651, 
653 

Currency.  See  Circulating  Medium, 
655 

— ,  Depreciation  of,  195,  457,  470 

Day,  Mr.,  Founder  of  the  New 
York  Sun,  494 

Dead  Horses,  Dividends  on,  316 

Deadly  Parallel  between  Produc- 
tion and  Commercialism,  129 

Debs,  Eugene  V.,  313 

Debt,  Public,  111,  465 

Decentralization  vs.  Centralization, 
113,  147,  150,  427,  507,  509, 
511,  513,  516 

Deficit  in  Employment.  See  Un- 
employment 

Degradation,  Social,  165,  177,  251, 
338,  423,  472,  492,  615,  617, 
618,  682,  818,  831 

Delusions,  Economic,  55,  230,  471, 
589,  591,  600,  619,  679,  791 


Demand.  See  Consumption,  161, 
169,  193,  233,  373,  377,  418, 
499,  545,  584,  594 

—  for  High  Prices,  419 

— ,  Supply  and,  in  Labor,  633 
Democracy,  265,  352,  718,  725,  767, 

778,  789 

— ,  Economic.     See  Economic 
Demoralization.     See  Degradation 
Density  of  Population.     See  Con- 
gestion, 358,  543 
Depreciation  of  Capital,  223,  307 

—  of  the  Currency,  195,  457,  470 
Derelicts,    Social.      See    Degrada- 
tion, 338,  831 

Despotism,  Economic.  See  Social 
Control,  Social  Subconsciousness, 
134,  244,  420,  423,  536,  549,  565, 
590,  615,  675,  718,  742,  777,  783, 
818,  824 

Determinism.  See  Economic,  Social 
Subconsciousness 

Dewey,  Professor,  443,  542 

Dilution  of  Purchasing-Power,  195, 
457,  469 

Diluits,  195,  469,  744 

Direction  of  Modern  Tendencies. 
See  Evolution,  146,  150,  171, 
358,  374,  434,  439 

Discontent.  See  Social  Philos- 
ophies, 155,  181,  377,  597,  599, 
614,  678,  681 

Discounts,  114 

Diseases  of  Nations,  1,  470,  580, 
588 

Disparity  in  Income,  336,  355,  378, 

549,  591,  596,  690,  692 
-  in  Unemployment,  595 

Display,  230,  414,  504,  518 

Dissipation,  Moral  vs.  Economic, 
56,  63,  425 

—  of   Economic   Energy,   63,   157, 

425 
Distribution  of  Urban  Population. 

See  Congestion,  364 
Dividends.    See  Watered  Stock,  91, 
94,    101,   106,    196,   204,   259 

—  on  Dead  Horses,  316 
Diversity,  30 

Divertive  Occupations,  398,  432 


INDEX 


857 


Dogmatism,  Social,  759,  832 
Domestic  Labor,  360,  394 

and   Unemployment,   632 

Domination,    Economic,    272,    403, 

591 

Drift  in  Occupations.  See  Migra- 
tion 

Duality  in  Modern  Progress.  See 
Basic  Economic  Contrast,  127, 
147,  171,  712 

Dubuque  &  Sioux  City  E.E.,  270 
Duplication,  49,  53,  140,  409,  784 

Earnings.    See  Expansion,  90,  101, 

108 
Economic  Aim,  38 

—  Air-Brake,  480 

—  Analysis,  372,  442,  481 

—  Anarchy.     See  Anarchy 

—  Aristocracy,  592 

—  Autocracy.    See  Oligarchy,  352, 

493,  728 
— ,  The  Body-,  467,  579 

—  Cancer.      See   Deadly   Parallel, 

712 

—  Catalysis,  71,  125,  570,  642 

—  Causes.    See  Economic  Sources, 

Social  Subconsciousness 

—  Censor,  782,  789 

—  Circulation.       See     Circulating 

Medium,    Economic   Fluidity, 
31,  599 

—  Citizen,  Birthright  of  the.    See 

Ultimate  Consumer,  729,  730 

—  Community,  Perfect,  586 

—  Competence,  589 

—  Consciousness.     See  Social  Sub- 

consciousness,   714 

—  Contrast,  The  Basic.    See  Basic 

—  Control.      See    Social    Control, 

383,  410,  713 

—  Crises.    See  Crises 

—  Criterions,  41,  43,  66 

—  Degradation.      See    Social    De- 

gradation, 177 

—  Delusions,    55,    230,    471,    589, 

591,  600,  619,  679,  791 

—  Democracy,  265,  352,  718,  726, 

729,  731,  739,  749,  754,  777, 
783,  818,  824 


Economic  Democracy  and  Social- 
ism. See  Consumerism,  So- 
cialism 

—  Despotism.    See  Social  Control, 

134,  244,  420,  423,  536,  549, 
565,  615,  675,  718,  742 

—  Determinism,  57,  59,   383,  528, 

536,  550,  595 

—  Detonator,  669,  777,  779 

—  Dissipation,    56,    63,    157,    390, 

425 

—  Dogmatism,    759 

—  Domination,  272,  403,  591 

—  Duplication,  49,  53,  140 

—  Education,  351,  370,  776,  778, 

804,  820,  827 

—  Efficiency,    178,    185,    274,   310, 

383,  408,  467,  472,  475,  586 

—  Energy,    188,   479,   642 

,  Distribution  of,  443,  450 

,  Transfusion  of,  339 

—  Equilibrium,  231,  238,  243,  276, 

281,  383,  423,  498,  556,  574, 
598,  632,  658,  666,  842 

—  Equity.     See  Economic  Citizen, 

766 

—  Equivalence,   137,  588 

—  Evolution.       See     Eelative 

Growths,  Evolution 

—  Expansion.     See  Expansion 

—  Fluidity,  248,  364,  615,  634,  770 

—  Forces.      See     Social     Subcon- 

sciousness,  56,  100,  152,  205, 
218,  236,  521,  529,  678 

—  Functions.     See  Economics  and 

Politics,  151,  242,  712 

—  Gravitation,  142,  360,  369,  386 

—  History.      See    Evolution,    111, 

188,  235,  475 

—  Hypnosis,  230 

—  Ideals,  586,  726,  731,  753,  760 

—  Independence,  588 

—  Inertia,   202,   633 

—  Issue.     See  Question,  251 

—  Journal,   The,  443 

—  Lag,  488,  533 

—  Liberty,  154,  252,  493,  584,  641, 

789,  824 

—  Migration,   360,  368,   373,   386, 

544,  566,  634,  712 


858 


INDEX 


Economic  Motive  Forces.  See 
Social  Sub-consciousness,  56, 
152,  234,  236 

—  Oligarchy,   355,   591,    705,   711, 

718,  817 

—  Opportunity.     See   Civilization, 

Latent,    477,    587,    590,    595, 
612 

—  Organization.        See      Factory- 

System,    178,    185,    383,   408, 
467,  472,  475,   729,  775,  779 

—  Orthodoxy.    See  Sociology,  Pro- 

fessional, 42,  470 

—  Paradoxes,  605,   612,  614,  632, 

637,  638,  682 

—  Parasite.      Sec    Commercialism, 

143,  156,  240,  470,  571,  618 

—  Patriotism.     See  Treason,   297, 

556,   722 

—  Perfection,   42,    178,    185,   200, 

307,  586,  726,  731,  753,  760 

—  Poll,  187,  390 

—  Possibilities,  183,  330,  410,  477, 

556,  637 

—  Power.  See  Ultimate  Consumer, 

78,  165,  188,  194,  558,  650 

—  Preparedness.     See   Education, 

Reform,  729 

—  Problem,    The.      See    Question, 

38 

—  and    Political    Functions    Dis- 

tinct.     See    Economics    and 
Politics 

—  Reform.     See  Reform 

—  Responsibility.       See     Treason, 

482,  697,   737,  738,  744,  746 

—  Robbery.     See  Surplus,  792 

—  Series  and  Parallel,  513 

—  Shrewdness,  730 

—  Slavery.      See    Social    Subcon- 

sciousness,  242 

—  Sources,  165,  188,  194,  197,  280, 

339,  348,  471,  492,  521,  529, 
555,  579,  729 

—  Sovereignty,    39,   41,    165,    194, 

237,  241,  280,  591,  593,  712, 
726,  729,  740,  753,  824 

—  Superstitions,     146,     208,     235, 

354,  356,  463 


Economic     Tradition:      See     Eco- 
nomic Superstitions 

—  Transformation,  78,  558,  650 

—  Tribute.     See  Interest,  Theory 

of,  93,  100,  137,  196,  303 

—  Turbulence  due  to  Commercial- 

ism, 380,  424,  548,  636,  660 
Economics,  Cumulative.     See  Com- 
mercialism,   Growth   of,    261, 
651,  653 

—  and  Death-Rate,  294 

—  and  Electricity,  644 
— f  Equity  in,  692 

—  and  Ethics,  88,  168,  176,   192, 

241,  244,  247,  294,  313,  329, 
333,  339,  342,  350,  400,  406, 
414,  415,  420,  422,  424,  436, 
439,  470,  483,  491,  506,  541, 
584,  591,  599,  604,  618,  622, 
637,  639,  709,  723,  747,  768, 
783,  834,  845 

— ,  Ideal,     587,     726,     731,     753, 
760 

—  and  Legislation.  See  Economics 

and  Politics,  641,  679,  682, 
691,  833 

—  and  Morals,  56,  100,  152,  236, 

425,  471,  604 

— ,  Obsolete,  46,  51,  81,  561 
— ,  Orthodox.     See  Sociology,  230, 

470 

—  and  Politics,  37,  151,  195,  242, 

493,  577,  641,  671,  712,  714, 
749,  765,  833 

—  and  Psychology.     See  Psychol- 

ogy, 167,  236,  435,  549 
— ,  Submarine,  294 
-  and  Thermodynamics,  643,  645 
Editorial.      See    Journalism,    370, 

448,  510,  572,  787,  804 
Education.     See  Universities,   351, 
646,  776,  778,  789,  792,  804,  820, 
827 
Educational  Function  of  War,  183, 

650 

Educator,  War  as  an,  183,  650 
Efficiency,   Commercial.     See  Eco- 
nomic, Social,  274 
— ,  Economic.     See  Economic 

—  and  Economy,  25,  129,  178 


INDEX 


859 


Eggs,  376 

Electric  Light  and  Power,  29,  421, 
505 

—  Eailway  Association,  American, 

773 

—  Traction,  29 
Electricity,  644,  723 
Eleemosynary  Institutions,  332,  339 
Elevated  Eailway,  29,  684 
Elevator,  30 

Employer,  53,  129,  144,  187,  533, 
583,  598,  612,  678,  681,  746 

Employer's  Eeligion.  See  Busi- 
nessmen, Capital,  53,  144 

Employment.  See  Unemployment, 
579,  586,  593 

— ,  Basic  Law  of,  599 

—  Bureaus,  601 

Emulation.  See  Competition,  176, 
641,  694,  743 

Energetics,  Social,  157,  239,  373, 
438,  556,  618,  632,  638,  642, 
717,  812,  832 

— ,  Basic  Contrast  in  Physical,  157 

Energy,  Economic.  See  Social  En- 
ergetics, 44,  188 

English  Tallies,  81 

Entropits,  197,  343,  373,  569,  744 

Equality,  320,  590 

Equilibrium,  Economic.  See  Eco- 
nomic 

Equities,  138,  279,  293,  320 

Equivalents,  Economic,  1&7,  588 

Ethics.  See  Social  Philosophy, 
Cowardice,  Economics,  Pa- 
triotism, 831 

—  and  Evolution.     See  Evolution 
Evelyn,  Sir  George,  539 
Evening  Mail,  New  York,  505 
Evolution.     See  Eelative  Growths, 

Social  Evolution 

— ,  Competition  and  Economic,  235, 
325 

— ,  Economic,  45,  48,  91,  111,  124, 
148,  171,  183,  188,  235,  325, 
358,  374,  432,  450,  472,  478, 
512,  520,  523,  532,  540,  546, 
560,  678,  682,  723 

—  vs.  Edict,  832 

— ,  Ethics  and  Social,  520,  723 


Evolution,  Political,  29 

— ,  Social  vs.  Industrial,  183 

Expansion,  90,  101,  108,  206,  208, 

211,  254,  289,  310,  314,  317, 

318,  474,  651,  706 
— ,  Acceleration  of,  264 
— ,  Factory-System,  211 
— ,  History  of,  100 

—  of  Population,  48 
Exports  and  Imports,  15,  123 
Extension   of  Facilities.     See  Ex- 
pansion 

Face- Value.      See    Securities,    104, 

256 
Factory-System,  46,  49,  54,  61,  69, 

127,    151,    154,    206,   211, 

289,  412,  475,  587,  835 

Credit.     See  Credit 

— ,  Ideally  Complete,  586,  726, 

731,  753,  760 

,  Incomes  under  the,  767 

,  A  Metropolis  under  the,  412, 

762 
permeated   with   Ownership- 

in-Industry,  129,  774 
Failures,  Bank-,  661 
— ,  Commercial,  659,  669 
Famine.     See  Life-Support,  Para- 
site, 177,  358,  374,  434,  615 
Farm-Area,  375 

—  Credits,  121,  123,  375 

—  Implements,  24,  375 

—  Products,  123 

—  Valuation,   375 
Fashion,   414,   548 

Federal   Bureau   of  Labor   Statis- 
tics, 628 
-  Eeserve  Bank,  655 

Finance.     See  Circulating  Medium, 
Money,  88,  111,  254,  345 

— ,  History  of  American,  111 

Fire-Insurance,  115 

Fisher,  Edmund  D.,  87 

— ,  Professor  Irving,  284,  298,  301, 
303,  306,  461,  526,  535,  542 

Flint,  Charles  E.,   103,   106 

Flotsam,  Social,  338,  831 

Fluidity,  Social,  248,  364,  615,  634 


860 


INDEX 


Food  Commission,  New  York  State, 
513 

—  or  Famine.     See  Life-Support, 

358,  372,  374,  380,  434,  478, 
615 

—  Supply.      See    Produce,    Life- 

Support,  392,  432 
Force  versus  Credit,  757 
Foresight  and  Commercialism,  295 
Forum,  787,  799,  802 
Free  Speech,  493,  780 

—  Will,  Social.     See  Social   Sub- 

consciousness 
French  Eevolution,   736,   755,   756, 

777,  796,  846 
Fruit,  376 
Functions,  Economic  vs.  Political. 

See  Economics  and  Politics,  151, 

242 
Future  Progress,  412,  767,  775 

Gardner,  Mr.,  Vice-pres.  Chicago  & 

Northwestern  R.R.,  273 
Gas-Power,  25 

Gas- Works,  Philadelphia,  763 
George,   Henry,   202 
Geographical  Review,  684 
Gilchrist,   Charles  A.,   692 
Gilman,  Charlotte  Perkins,  250 
Gold,   72,   77,   385,   455,  478,   537, 

656,  706 

Goodnow,   Professor,   542 
Gradual  Reform,  769,  772,  804,  825 
Graft,  212,  763 
Gravitation,    Social.      See    Social 

Degradation,  142,  251,  369,  632 
Griffith,  James  B.,  122 
Growth,    Social.       See    Evolution, 

Relative  Growths 

Harvester-Trust,  516 
Hay,  374,  478 
Hayes,  Professor,  217,  805 
Hepburn,  A.  B.,  88 
High  Cost  of  Living.     See  Price 
Hill,  James  J.,   103,  322,  549 
Hillquit,  Morris,  313,  734,  742,  760 
Hiring-Power,  Social.     See  Unem- 
ployment, 586,  590,  593,  612 
Horses,  375 
Howard,  Professor,  88 


Howe,  Robert,  80,  83 

Human  Nature  and  Reform.     See 

Reform,   169,   182 
and      Unemployment,      583, 

611,  632 
Hypnosis,  Economic,  230 

Ideal  Economics.  See  Economic 
Perfection,  587,  726,  731,  753, 
760 

Idleness.    See  Unemployment 
Illinois  Central  R.R.-,  225,  268 
Illiteracy  and  Unemployment,  632 
Illumination,  29,  421,  505 
Immorality,  56,  63,  244,  425,  604, 

609,  639 

Imports  and  Exports,  15,  123 
Income  and  Outgo  of  Interest,  220, 
335 

of  Prices,  237 

of  Rent,  201 

Incomes,  217,  691,  767 
Income-Tax,  641,  691,  695 
Income,   Unearned.     See  Commer- 
cialism, 753 

—  and    Valuation,    68,    100,    105, 

214,  224,  243,  258,  302,  750, 

776 

Incompetence,   582,   611,  632 
Individual  Forces,  Social  vs.,  406, 

814,  834 

—  vs.    Social   Responsibility.     See 

Responsibility,  471 

Individuals,  Activities  vs.,  128,  142, 
152,  188,  745 

Industrial  vs.  Social  Evolution. 
See  Evolution,  183 

Industrial  Securities.  See  Circu- 
lating Medium,  Securities,  255, 
317,  461 

Industry  in  the  18th  Century,  5 
-  Paralysed  by  Caste,    132,    134, 
146,  592 

— ,  Women  in,  386 

Inefficiency,  Commercial.  See  Com- 
mercialism, 118, 129,  274,  310,  408 

Inertia,  Economic,  202,  633 

Inevitable  Conflict.  See  Revolu- 
tion, 617 

Ingle,  William,  76,  86 


INDEX 


861 


Initiative,  Commercial,  135,  207, 
208,  211,  213,  215,  223,  228, 
265,  324,  779 

— ,  Factory-System,   176,  211 
Insane  Economics.     See  Economic 

Delusions,  38,  419,  589,  730 
Instability,    Social.      See    Revolu- 
tion,  74,  98,  173,  263,  585,  622, 
640,  653,  669,  677,  694,  708,  752 
Insurance,  88,  114,  117,  123 
Intellectual  Cowardice,  2,  169,  695, 
757,  778,  793,  805,  806,  809 

—  Laziness,  581,  640,  796 

—  Patriotism.     See  Treason,  639 
Interborough  Kapid  Transit  Com- 
pany, 688 

Commission,  684 

Interchange,  50,  63,  154,  587,  593, 
702 

—  and  Credit,  72 
Intercollegiate     Socialist     Society, 

733,  736,  745,  759 
Interest,  67,  93,  100,  196,  204,  215, 
254,  284,  298,  301,  332,  458 

—  Bearing  Securities.    See  Securi- 

ties 

—  Burden,  Aggregate,  463 

—  not  a  Source  of  Value,  222 
— ,  Origin  of,  217 

—  Rate,  93,  306,  460,  463 
— ,Who  Pays,  286,  459 
INTEREST-THEORIES  : 

General,  215 

Professor  Fisher's,  284,  298,  320 

Summary  of,  320 

Tributary,  303 

Use  or  Productivity,  301,  304 
Interest,  Zero  Rate  of,  306 
Interstate    Commerce    Commission, 

225,  268,  309,  447,  448,  451,  463 
Invention  as  a  Social  Cause.     See 
Patents,  5,  11,  23,  28,  30,  32, 
35,  147,  485,  560,  566 

—  and  Securities,  486 
Investment,  106,  108,  114,  208,  213, 

215,  223,  228,  258,  262,  265, 
276,  462 

— ,  Opportunities  for,  209,  213, 
215,  223,  228,  268,  273,  276, 
324,  462 


Invisible  Government.  See  Social 
Subconsciousness,  435,  698,  707 

Involuntary  Social  Action.  See 
Social  Subconsciousness 

Iron,  385,  478 

Jackson,  Andrew,  704 

Jewishness,  656,  767 

Jobs,  593 

Journal  of  Commerce,  New  York, 

107,  464 
Journal  of  the  Statistical  Society, 

443 
Journalism,  354,  370,  490,  503,  782, 

784,  788 

— ,  Boiler-Plate,  497 
— ,  History  of,  494 

-  and  Transit-Facilities,  352,  788 
Juglar,  Clement,  657 

Kansas  City  Union  Depot,  279 
Kennedy,  Professor,  542 
Kuczynski,  Dr.,  on  Wages,  443 

Labor  and  Capital,  53,  471,  507, 
591,  598,  602,  605,  612,  614, 
628,  641,  672,  679,  737,  739, 
749 

saving  Machines,  640 

— ,  Surplus,   632,   634,   640 

Lag,  Social,  23,  149,  488,  703,  835 

Laissez  Faire,  252 

Lake-Navigation,  13 

Land,  192,  196,  199,  202,  370,  412, 
448 

Lane,  Secretary,  718 

Latent  Civilization,  183,  330,  410, 
412,  477,  556,  637 

Laundry,  413 

Laughlin,  Professor,  589,  542 

Law,  Sherman  Anti-Trust,  94,  317, 
452,  510,  515,  670,  707 

Law  of  Unemployment,  Basic,  599, 
633,  636 

Layton  on  Prices,  526 

Laziness,  Intellectual,  581,  720, 
796 

-  and    Unemployment.      See    Un- 

employment, 581,  611 
Lead,  385,  478 


862 


INDEX 


Legislation    and    Economics,    641, 

679,  682,  691,  833 
Lewis  and  Clark,  323 
Liberty,  154,  252,  493,  789,  824 
— ,  Academic,  782 
— ,  Economic,  727,  824 
Life  vs.  Commercialism,   165,   177, 

247,  251,  338,  423,  472,  492, 

615,  617,   682,   831 

—  Insurance,  115 
Life-Support,  37,  41,  62,  142,  145, 

152,  185,  192,  238,  240,  358,  371, 
372,  374,  377,  380,  392,  432,  470, 
478,  587,  590,  615,  701,  730 
Lincoln,    Abraham,    34,    705,    718, 

726,  751,  755,  812 
Literary  Digest,  107 
Literature  Charged  All  the  Traffic 
will  Bear.    See  Art,  244,  425, 
498,  501 

—  under  Commercialism,  834 
Litigation.       See     Sherman    Anti- 
Trust  Law,  345 

Live  Stock,  375,  465 

Loan    and    Trust    Companies,    111, 

112 

Loans,  83,  111,  114,  197,  207,  284 
Lockouts,  346,  532,  676 
Locomotives,  22,  26,  426 
Logan,  James,  103 
Loyalty.     See  Patriotism,  Treason 
Lumber,  385,  478 

Machinery.      See   Appliances,    130, 

196,  465 
Malnutrition,  Social.     See  Famine, 

Life-Support,  238,  470,  841 
Manufacture,    123,    360,   386,   446, 

507,  517 
— ,  Economic  Analysis  applied  to  a 

Single,   481 
Marine  Engine,  25,  26 

-  Insurance,    115 
Market-System,     Terse     Definition 

of,   See  Commercialism,  166,  826 
Marx,  Karl,  733,  757* 
Mass-Action,  644 
Massachusetts  State  Census,  443 
Materials,  Raw,  385,  478 
Mathematical  Law  of  Charging  All 

the  Traffic  will  Bear,  239,  839 


Maxima  of  Stock-Prices,  668 

—  of  Wages,  445 
McKinley,  President,  708 
Meat,  376 

Mechanical  Occupations,   392,  432 

Mellen,  Charles  S.,  313,  442 

Men's  Clothing,  518 

Merchant  Marine,  American,  14,  27 

Mercantile  Pursuits,  396,  432 

Merchandizing,  121,  164,  325,  407, 
408,  610 

Messenger-Boys,  167,  435 

Metabolism,  Social,  31,  188,  198, 
238,  340,  430,  458,  470,  570,  579, 
839 

Middlemen,   163,  513 

Migration,  360,  368,  373,  386,  536, 
544,  566,  634,  712 

Militarism.  See  Commercial  Mili- 
tarism, War,  355,  523,  555,  566, 
701,  708,  815 

Milk,   381 

Minima  of  Stock-Prices,  668 

—  of  Wages,  445 
Minimum  Wage,  628,  641,  679 
Monetary  Standard.    See  Gold,  72 
Money.     See  Circulating  Medium, 

Finance,  94,  454,  470,  507 

-  in  Circulation,  111 

—  Making,  261,  651,  666 

—  Trust,  91,  113 

Monopoly.     See  Centralization,  49, 

53,  510,  513,  516,  763 
Moral  vs.  Economic  Forces,  56,  100, 

152,  236,  425,  471,  604 
Morgan,  J.  P.,  314 
Mormon  Economics,  288 
Mules,  375 

Mulhall  on  Prices,  525,  552 
Multiplicity  in  Industry,  131,  140, 

424 
Municipal  Ownership.     See  Public 

Ownership 
Munitions  of  Commercial  Warfare, 

396,  432 
Mutton,  376 

National  Banks,  111,  112 

-  Factory-System,   60,   166 

—  Market-System,  166 

—  Party,  734 


INDEX 


863 


National  Road,  7 

—  Vanity,  382 

Nations,  Diseases  of,  1,  470,  581, 

588 
Natural  Cost,  137,  184,  277,  793 

—  Economics,    39,    412,    586,    588, 

726,  731,  753,  760 

—  Insurance,  117 

—  Price,  184,  586 

—  Rent,  200 

Navigation,      Lake,      Ocean      and 
River,  11,  13,  14,  25,  27 

Nearing,  Scott,  693 

Negotiation.      See    Commercialism, 
62,  127,  159,  411 

Negro  Labor,  360,  389 
-  Slavery,   8,    11,   360,    389,   704, 
719 

Neuhaus  on  Wages,  443 

Newspapers  and   Periodicals,   490, 
496,  498,  782,  784,  790 

Non-Combatants,     Economic,     434, 
479 

North  American  Beview,  102 

Nullification,  704 

Nutrition,   Community.     See  Life- 
Support,  238 

Oats,  374,  478 

Obsolete    Economics,    46,    51,    81, 

561.     See  Sociology 
Ocean-Navigation,    11,    14,    25,   27 
Occupational    Drift.      See    Migra- 
tion 

Occupations,  387 
— ,  Classification  of,  390 
— ,  Commercial.      See   Commercial- 
ism,  390,   396,   404,   406 
— ,  Productive.       See     Production, 

390,  394,  404 
—  and   Unemployment,    623,    625, 

631 
Oligarchy.      See    Autocracy,    355, 

591,  705,  711,  718,  817 
OMITTED  LOSSES: 

By-Producti,  406,  425 

Ethics,  637 

Hiring  Labor,  342 

Illumination,  Commercial,  506 


OMITTED  LOSSES  (continued) 

Indirect      Transportation,      346, 
410,  426 

Insurance,  118 

Interest    on    Commercial    Paper, 
121 

Lack  of  System,  426 

Miseducation,    789 

Non-Combatants,  434 

Politics,  765 

Profits,  458 

Retail  Shopping,  406 

Sanatariums,    429 

Seeking  Work,  618 

Strikes  and  Lockouts,  346,  532, 
676,   779 

Surplus,  458 

Transit- Advertisements,  352,  788 

Transportation,     Indirect,     346, 
410,  426 

Unemployment,   605,   609 
Opportunities  for  Investment,  209, 

213,  215,  223,  228,  265,  276,  324, 

462 

Opportunity.      See    Economic    Op- 
portunity 

Opera  under  Commercialism,  417 
Optimism,  616,  829 
Organization,     Perfect     Economic, 

412,  586,  726,  731,  753,  760 
Organize   as    Ultimate    Consumers, 

729,  775,  779 

Organized  Labor.     See  Unions 
Orthodox  Economics,  42,  230,  371, 
438,  470,  510,  638 

—  Socialism.    See  Socialism 

—  Sociology.     See  Sociology 
Outlook,  The,  105 
Over-Work,  597 
Ownership-in-Industry,  49,  61,  127, 

130,  138,  143,  151,  167,  295,  396 
Ownership  vs.  Possesion,  49,  51 

Pacific  Railway,  29 

Paish,  Sir  George,  96 

Panic    of    1914,    Silent,   654,    660, 

663,  665,  668 
Panics,    History    of.      See    Crises, 

656 


864 


INDEX 


Panoply  of  Commercial  Warfare. 
See  Munitions 

Parasite,  The  Economic.  See  Com- 
mercialism, 143,  156,  172,  240, 
571,  618 

Paradoxes,  Social.  See  Economic, 
Social 

Parcel  Post,   700,   772 

Park,  Mr.,  Vice-Pres.  Illinois  Cen- 
tral R.R.,  268,  309 

Patent-Medicine  Civilization,  Our, 
295 

Pathology,  Social,  1,  470,  581,  588 

Patriotism,  251,  297,  556,  639,  649, 
711,  722,  806,  209,  817,  819, 
821,  829 

—  and  Credit,  78,  554,  558,  650 
Patten,  Professor,  542 

Peace  and  War,  167,  183,  556,  559, 
561 

—  and  Commercialism,  564 
Peaches,  369 

Peanuts,  376 

Pease,  374,  478 

Per  Capita  Data  (The  data  them- 
selves are  in  the  Tables),  10,  357, 
375 

Periodicals  and  Newspapers,  490, 
496,  498,  782,  784,  790 

Petroleum,  385 

Pharisaism,  800 

Philosophy,  Social.     See  Social 

Pioneer  Economics,  291,  587 

Piracy,  207,  209 

Political  Impotence.  See  Eco- 
nomics and  Politics,  Social- 
ism 

—  Corruption.     See  Corruption 
Politics  and  Economics.     See  Eco- 
nomics 

Poor,    Assoc.    for    Improving    the 

Condition  of  the,  380 
Population,  Proportionality  to,  10, 

357,  375 

— ,  Density  of,  358,  362,  543 
— ,  Distribution  of,  363 

—  and  the  Factory- System,  48 

— ,  Prosperity     Grows    with,     544, 

640 
Populism,  707 


Pork,  376 

Post-Office,  489,  700,  771 

Potatoes,  374,  381,  478 

Potentialities,  Social.  See  Civiliza- 
tion Latent,  Social 

Poultry,  375,  376 

Poverty.  See  Disparity,  Display, 
169,  336,  513,  690 

Power,  Economic,  165,  188,  194 

— ,  Stationary,  24 

Preparedness,  Economic,  729 

Press,  Liberty  of  the.  See  Jour- 
nalism, 493^,  782 

Price.  See  Natural,  60,  184,  221, 
234,  237,  258,  281,  373,  377, 
380,  419,  513,  525,  528,  536, 
543,  545,  550,  552,  586,  602, 
678,  713,  746 

—  Determinants,  Summary  of,  550 

—  Index,  123,  525,  540 

—  of  Stocks,  668 

— ,  Tooke's  Theory  of,   553 

Prices  and  Taxes,  573 

Printing-press,  30,  495 

Printing  and  Publishing,  396,  518 

Privateering,  209 

Production,  39,  55,  56,  58,  127, 
142,  160,  372,  374,  376,  383, 
385,  390,  394,  404,  507,  545, 
701,  730,  733,  738,  741 

—  vs.   Commercialism.     See  Basic 

Economic  Contrast,  404,  456, 
469,  474 

—  and  Discontent,  379 

—  Dominated    by    Commercialism, 

272,  403,  591 

—  Eelative    to    Productivity,    60, 

169,  241,  373,  499 
Productive    Population    Analyzed, 

392 
Productivity,  4,  57,  142,  192,  383, 

426,  544 

Professional  Occupations,  360,  394, 
404,  624 

—  Sociology.     See   Sociology,   42, 

230,  371,  438,  470,  510,  542, 

550,  603 
Profits.     See  Diluits,  91,  94,  101, 

137,  235,  239,  458,  641,  764 
Profit-Sharing,  53,  153 


INDEX 


865 


Progress,  Future,  412,  775 
Propaganda,  Commercial,  209,  230, 

267,  790,  822 
Property,    51,    52,    109,    345,    396, 

461,    465,    679,    702,    729,    766, 

772,  776 

Property,    Confiscation    vs.    Aboli- 
tion of.     See  Confiscation,  51 

—  in   Industry,    49,   61,    127,   130, 

138,  143,*  151,  167,  295,  396 
Proprietary  Kewards,  295 
Prosperity    and    Discontent,     155, 

377 

—  Grows    with    Population,    544, 

640 

Psychology    in    Social    Energetics, 
167,  236,  435,  549,  585,  611,  632, 
635,   814,   824,   831 
Public  Debt,  111,  465 
Public  Ledger,  Philadelphia,  316 
Public  Opinion  and  Social  Evolu- 
tion.      See     Social     Subcon- 
sciousness,  723,  833 
-  Ownership,   184,  314,  326,  698, 

763,   769 
Publicity,  267 
Pujo  Committee,  91 
Purchasing-Power,    161,    169,    195, 
457,  469,  470,  524,  531,  534, 
590,  593,  669,  680,  682,  733 
—  and  Panic,  654,  669 

Qualitative   and    Quantitative    Un- 
employment, 605 

—  Sag   in  Supply,   423,   498,   598, 

607,  614 
Quantity  X,  391 
Quantity  Y,  401 
Quarterly    Journal    of    Economics, 

657 
Question  of  the  Day,   The  Great, 

146,  824 

Radicalism,  144,  252,  314 

Eailroads,  560 

— ,  Condition  of,  309 

— ,  Efficiency  of  Operation  of,  274, 

310 
— ,  History  of,  17,  20 

—  and  Receiverships,  663 


Railroads,  Wealth  of,  465 
Railroad-Rates,   19,  225,   258,  268, 

275,  281 
Eailway-Age     Gazette,     313,     442, 

443,  663,  684 

Railway-Terminals,  20,  279,  411 
Rand  School,  733,  736,  790 
Rate  of  Interest.    See  Interest,  93, 
306,  460,  463 

—  of  Issue  of  Securities.    See  Se- 

curities 

Rates    of    Social    Evolution.      See 
Evolution,       Reform       Gradual, 
Relative  Growths,  Time 
Raw  Materials,  385,  478 
Real  Estate.     See  Land,  Rent,  465 
Reapers,  24 
Receiverships,  663 
Recreation    under    Commercialism, 

390,  393,  413,  418,  428 
Reform,    170,    182,   378,   434,    700, 
702,  713,  723,  729,  746,  748, 
752,  769,  775,  779,  786,  799 
— ,  Educational,  823 

—  Gradual,   769,   772,   804,  825 

—  and  Human   Nature,    168,   170, 

435,  833,  835 

—  and  Time,  358,  431 
Refunding.      See    Securities,    101, 

229 
Relationships  vs.  Components,  179, 

182 

Relativity,  644,  815,  836 
RELATIVE  GROWTHS:   111,  520 

Advertising  and  News,  498,  503 

—  and  Population,  502 

Agricultural  -  Implement      F  a  c- 
tories,  516 

Averages   and   Individuals,   366, 
512 

Business-Concerns  and  Factories, 
512 

and  Population,  511 

Capital     and     Population,     110, 
515 

Centralization  and  Decentraliza- 
tion, 148 

Cities,  364 

Classes  of  Commercialism,  430 


866 


INDEX 


EELATIVE  GROWTHS  (continued) 
Commercialism    and    Production, 

392-398,    432,    456,    469,    474, 

519 
Communication   and   Population, 

6,  14,  20,  22,  489,  496 
Cosmetics,  518 
Credit-Bases     and     Price-Index, 

123 
Factories   and   Population,    507, 

515 

Food  and  Population,  374 
Invention     and     Commercialism, 
512 

—  and  Population,  487 
Manufactures,  Different,  517 

—  and  Population,  507,  515 
Men's  Furnishings,  518 
Merchant   Marine   and   Exports, 

15 
Charity,    Need    and    Supply    of, 

341 

Occupations,    Broad    Classes   of, 
360 

— ,  Domestic  and  Factory,  360 

Periodicals  and  Population,  496, 
518 

Prices  of  Agricultural  and 
Manufactured  Goods,  525 

Printing  and  Publishing,   518 

Production  and  Commercialism, 
392-398,  432,  456,  469,  474, 
519 

Profit-Sharing  and  Commercial- 
ism, 153 

Purchasing-Power  and  Nutri- 
ment, 238 

Raw  Material  and  Population, 
385,  478 

Supply  and  Prices,  380 

Technology  and  Commercialism, 
402,  432,  435 

Textile  Materials,  374,  478 

Tobacco,  374,  478,  518 

Wage-Earners  per  Factory,  508, 
515 

and  Population,  507,  515 

Wages  and  Prices,  527,  531 

Wealth,  Classes  of,  465 

Women's  Clothing,   518 


Eeligion,    Science    and    Sociology, 

830,  833 

Bent,  196,  199,  243 
— ,  Commercial,  243 
— ,  Natural,  200 

— ,  Receipt  vs.  Payment  of,  201 
Replacements.     See  Costs 
Repudiation,  79,  563 
Requisitions.    See  Credit,  Factory- 
System 

Responsibility,     Social,    226,    482, 

523,    574,    584,    639,    697,    737, 

738,  744,  746,  798,  801,  803,  804, 

809,  821 

Retail    Trade.      See   Selling,    121, 

164,  325,  407,  610,  618 
Revolution.  See  French  Revolution, 
559,  690,  696,  704,  714,  722, 
730,  750,  753,  819,  821,  827, 
846 

—  of  1848,  557,  580,  717,  757 
Rice,  374,  478 
Riches.      See    Incomes,    Disparity, 

Wealth 

Rights  of  Man,  584,  641,  727 
Ripley,    Mr.,    President   Santa  Fe" 

R.R.,  275,  309,  324 
Risk,   Commercial,    209,    256,   282, 

460,  462 

River-Navigation,  9,  13 
Robbery,  Economic.     See  Surplus, 

792 

Robitzek,  Justice  Harry,  243 
Rockefeller,    Mr.    J.    D.,    95,    730, 

805 

Rock  Island  R.R.,  315 
Rooney,  Mr.  J.  J.,  543 
Roosevelt,  Theodore,  704,  708 
Rubinow,  Dr.  I.  M.,  114 
Russia,  Soviet,  744,  757 
Ryan,  Mr.  John  D.,  670 

Sage,  Russell,  103 

Sailing-Ships,  14,  27 

Salaries,  441,  442,  448,  455 

Salary-Coefficients,  451 

Salt,  385 

Savings,   112,  218,  259,  301,  345, 

730 
—  Banks,  111,  112,  465 


INDEX 


867 


Schwab,  Mr.  Charles  M.,  103 
Science.     See  Sociology,  391,  435, 

618 
Scientific  Monthly,  692 

—  Superstitions,  814 

Seasonal  Trades  and  Unemploy- 
ment, 630 

Securities.  See  Stock,  67,  76,  82, 
99,  109,  123,  213,  254,  262, 
279,  330,  465,  472,  569,  571, 
665,  696,  714,  750,  753,  826 

— ,  Aggregate,  110 

—  and  Invention,  486 

— ,Rate  of  Issue  of,  77,  90,  95, 
101,  103,  107,  110,  123,  262, 
465 

Seligman,  Professor,  542 

Selling,  160,  344,  618 

Series  and  Parallel  in  Economics, 
513 

Sheep,  375 

Sherman  Anti-Trust  Law,  94,  317, 
452,  510,  515,  670,  707 

Shoe-Making,  Modern,  51 

Shonts,  Theodore  P.,  683 

Shop-Orders.  See  Credit  Factory- 
System 

Silent  Panic  of  1914,  654,  660, 
663,  665,  668 

Silver,  385,  478 

Site,  192,  196,  199 

Slavery,  Economic,  242 

— ,  Negro,  8,  11,  360,  389,  704,  719 

Slums,  683 

Social  Air-Brake,  480 

—  Analysis,  372,  442,  481 

—  Architects  vs.  Brickmasons,  180 

—  Auto-Intoxication,  471 

—  Cancer,  470 

—  Candor,  439,  812 

—  Catalytic,, 71,  125,  570,  642 

—  Causes.      See    Social     Subcon- 

sciousness,  385,  484,  716 

—  Components,   179,   182 

—  Consciousness.     See  Social  Sub- 

consciousness,  595 

—  Control.      See    Social    Subcon- 

sciousness,  94,  251,  422,  491, 
521,  536,  549,  713,  805,  809, 
811,  813  823,  824 


Social  Cowardice,  778 

—  Crises.     See  Crises,   Revolution 

—  Degradation,  165,  177,  251,  338, 

423,  472,  492,  615,  617,  618, 
682,  818,  831 

—  Delusion,    56,     230,    471,    589, 

591,  600,  619,  638,  679,  791 

—  Derelicts,  338,  831 

—  Despotism.     See  Economic  Des- 

potism, Social  Subconscious- 
ness 

—  Diversity,  30 

—  Dogmatism,  759,  832 

—  Efficiency.     See  Economic,  129, 

178,  185,  373,  383,  470 

—  Energetics,   157,  239,  373,  438, 

556,  618,  632,  638,  642,  717, 
812,  832 

—  Energy,  79,  812 

—  Equilibrium,      Unstable.        See 

Crises,  Revolution,  842 

—  Erosion,  251 

—  Ethics.      See     Economics    and 

Ethics,  Cowardice,  Patriot- 
ism, 823,  831 

—  Evolution.       See     Relative 

Growths,  45,  48,  91,  111,  124, 
124,  148,  171,  183,  188,  238, 
325,  358,  374,  399,  406,  432, 
439,  450,  520,  522,  532,  546, 
560,  626,  655,  662,  678,  682, 
723,  810,  812,  825 

—  Faith,  758 

—  Flotsam,  338,  831 

—  Fluidity,    248,    364,    615,    634, 

770 

—  Forces.     See  Economic  Forces, 

Social  Subconsciousness 
,  Transmision  of,  723 

—  Gravitation.     See  Degradation, 

142,  251,  369 

—  Immorality,    56,    63,    244,    425, 

604,  609 

—  Impotence.      See    Politics,    So- 

cial Subconsciousness,  37,  603 

—  Indirectness,  812 

—  Inertia,  202,  633 

—  Instability.   See  Revolution,  74, 

98,  173,  263,  585,  622,  640, 
653,  669,  677,  694,  708,  752 


868 


INDEX 


Social    Lag,    23,    149,    488,    703, 
835 

—  Malnutrition.       bee       Famine, 

Life-Support,  238,  470,  841 

—  Metabolism,   31,   188,   198,  238, 

340,  430,  458,  470,  570,  579, 
839 

—  Migration,  360,   368,  373,  386, 

633 

—  Motor-Nerves,  40 

—  Optimism,  616,  829 

—  Origins.      See    Capitalism,    So- 

cial Subconsciousness 

—  Paradoxes,  605,  612,  614,  632, 

637,  638,  682 

—  Pathology,   1,  470,  581,  588 

—  Perfection,    42,    178,    587 

—  Philosophies,  181,  253,  584,  599, 

615,  639,  682,  703,  715,  740, 
748,  759,  823,  831,  843 

—  Philosophy,    Bitter.      See    Dis- 

content, 181,  253,  584, 
599,  615,  639,  682,  759 

,  Inconsistency  in,  53,  69, 

129,  136,  144,  150,  155, 
156,  169,  175,  187,  284, 
349,  439,  614,  638,  731, 
783 

,  Technical.  See  Sociology, 

642 

—  Potentialities,    183,    330,    410, 

477,  556,  637 

—  Procreation,  617 

—  Propinquity,  29,  484 

—  Reform.   See  Keform,  170,  378, 

434,  713,  723 

—  Eeactions.     See  Social  Subcon- 

sciousness, 579 

—  Eelationships     vs.     Component 

Personalities,  179,  182 

—  Besponsibility.      See    Responsi- 

bility 

—  Science  and  Religion,  830 

—  Solidarity.      See    Social    Sta- 

bility 

—  Sovereignty.        See     Economic 

Sovereignty,    Ultimate    Con- 
sumer 

—  Stability.     See  Revolution,  42, 

173,  585,  622,  789 


Social  Subconsciousness,  39,  48,  56, 
60,  100,  231,  236,  242,  244, 
253,  370,  383,  384,  400,  406, 
422,  438,  472,  484,  486,  492, 
499,  512,  520,  536,  560,  594, 
596,  603,  606,  632,  635,  638, 
642,  680,  701,  708,  716,  724, 
727,  730,  747,  753,  781,  809, 
813,  847 

Social  Tyranny.  See  Social  Sub- 
consciousness,  718 

—  Vitality,  79,  479 

—  Will.    See  Social  Subconscious 

ness 

Socialism.  See  Intercollegiate, 
Rand,  252,  288,  297,  515,  570, 
596,  602,  639,  698,  702,  708, 
711,  713,  732,  737,  740,  755, 
757,  788 

—  and  Economic  Democracy,  749, 

755,  758 

Sociology,  Definition  of,  179,  182, 
703,  712 

— ,  Orthodox  or  Professional,  230, 
371,  438,  452,  470,  510, 
603,  638,  642,  656,  658, 
670,  691,  695,  697,  716, 
721,  732,  738,  749,  751, 
753,  778,  782,  799,  804, 
806,  812,  814 

and  Bank-Failures,  662 

—  Technical,   157,   239,   373,   438 

556,  618,  632,  638,  642,  813 

Sociodynamics.  See  Social  Ener- 
getics 

Sombart,  Werner,  361 

Sovereignty,  Economic.  See  Eco- 
nomic, Ultimate  Consumer 

Soviet,  744,  757 

Spahr,  Dr.  Charles  B.,  447,  692 

Specialization,  50,   63 

Special  Privilege,  272,  403,  591, 
834,  848 

Speculation,  163 

Spencer,  Sir  Herbert,  694 

Stability,  Social.  See  Revolution, 
74,  98,  173,  585,  622,  640 

Standards  of  Commercialism,  247, 
294,  313,  415,  420,  483,  491 


INDEX 


869 


Standards  of  Ethics.  See  Eco- 
nomics and  Ethics,  88,  192,  241, 
244,  247,  294,  333,  415,  420,  483, 
491 

Starvation- Wage,  615,  628 

State-Banks,  111,  112 

Statistical  Abstract,  U.  S.,  110,  464 

—  Conservatism.       See      Omitted 

Losses,  430 
Steam-Engine,  5,  24,  27 

—  Navigation,  7,  9,  11 
Steel,  31,  108,  318,  385 

—  Company,  Carnegie,  107 
Stephenson,  Robert,  18 
Stevens,  Albert  C.,  657 

Stock.    See  Securities,  82,  109, 123, 
254,  665 

—  lacking  Face-Value,  256 

—  on  Farms,  375 

—  Prices,  668 

—  Watering,    106,   224,    229,   257, 

267,  315 

Strikes,  346,  532,  676,  779 
Subconscious    Social   Action.     See 

Social  Subconsciousness 
Submarine    Commercial    Warfare, 

294 

Submerged  Tenth,  616 
Sugar,  374,  478 
Sun,  New  York,  494 
Superman,  832,  834,  837 
Superstition,  Economic.     See  Eco- 
nomic, Social  Delusion 
— ,  Scientific,  814 
Supply  and  Demand.     See  Trade, 
60,    161,    169,    233,    373, 
377,  380,  499,  545,  548 

in  Labor,  633 

Surplus,  Economic,   113,  260,  264, 
273,  458,  535 

—  Labor,  632,  634,  640 
Swine,  375 

Tallies,  English,  81 
Tariff,  387,  543,  680,  706 
Taussig,  Professor,  542,  549 
Taxation,  572,  641,  691,  695 

—  without  Representation,  727 
Technology,    149,    387,    403,    435, 

487,  520,  566 


Telegraph,  27,  489,  521,  560 

Telephone,  29,  246,  489,  521 

Terminals,  20,  279,  411 

Textile  Industries,  392,  432 

Theory  of   Interest.     See  Interest 

Thermodynamics,  643,  645 

Thiers,  79,  558,  650 

Threshing-Machines,  24 

Thrift.     See  Savings,  730 

Thurber,  F.  B.,  103 

Thurston,  Prof.  R.  H.,  9 

Time  as  a  Factor  in  Social  Evolu- 
tion. See  Relative  Growths,  358, 
522,  683,  825 

Times,  New  York,  90,  94,  108,  243, 
246,  298,  314,  318,  379,  501,  542, 
567,  637,  665,  688,  709,  744,  773, 
790,  802,  845 

Tobacco,  374,  478,  518 

Tourney,  The  Commercial,  174 

Town-Meeting,  787 

Trade,  Paralysis  of.  See  Economic 
Equilibrium,  241,  247 

—  and  Transportation,  360 

— ,  Volume     of.       See     Economic 

Equilibrium,    241,    247,    347, 

350 
Trades-Unions,  346,  597,  640,  678, 

708,   732 
Traffic  Charged  All  it  will  Bear. 

See  Art,  Literature,  232,  238, 

276,  281,  381,  423,  498 
— ,  Urban,  685 

Transformation,  Economic,  78 
Transfusion  of  Economic  Energy, 

339 
Transit-Facilities,  29,  683 

,  Journalism  and,  352,  788 

Transportation,  3,  6,  8,  11,  20,  22, 

159,  346,  363,  394,  410,  426, 

432,  484 
— ,  Commercial  Waste  of,  346,  410, 

426 

—  per  Capita,  Growth  of,  20,  22 
— ,  Vertical,  30 

Treason  to  Civilization.  See  Pa- 
triotism, 640,  722,  806,  809,  820 

Tribune,  New  York,  340 

Tribute,  Economic,  100,  137,  145, 
228,  268 


870 


INDEX 


Tributary  Theory  of  Interest.  See 
Interest,  303 

Trucking,  409 

Trust  Companies,  111,  112 

Trust-Company  Deposits,  465 

Trusts,  91,  101,  113,  383,  510,  516 

Turbine,  24,  27 

Turbulence,  Economic.  See  Dis- 
content, Economic 

Typewriter,  29 

Tyranny,  Economic.  See  Despo- 
tism, Social  Subconsciousness 

Ultimate  Consumer.  (Nearly  every 
page  in  the  book  refers  to 
this  all-important  topic. 
Below  are  indexed  only 
the  ideas  of  major  promi- 
nence.) 

the  Economic  Sovereign. 

See  fifth  topic  below, 
Also  Economic  Sover- 
eignty 

,  Feed  the,  39 

,  Function  of  Voter  Distinct 

from  that  of.  See  Eco- 
nomics and  Politics,  242 

,  Organize   as,    729,   775,   779 

the  Sole  Source  of  Credit, 

758 

the  Sole  Source  of  Economic 

Power,  165,  197,  280,  331, 
532,  572,  579,  586,  593, 
678,  681,  709,  729,  749, 
755,  758,  788 

Ultimate  vs.  Intermediate  Con- 
sumption, 162 

Unearned  Income.  See  Commer- 
cialism, Special  Privilege,  753 

Unemployment,  168,  241,  579,  594, 
596,  598,  620,  639,  713,  739, 
752 

— ,  Basic  Laws  of,  509,  633,  636 

— ,  Cause  and  Effect  in,  599,  633 

—  and  Credit,  619 

— ,  Fruits  of,  598,  604,  619,  622, 
637,  639 

— ,  Inanimate,  636 

— ,  Incompetence  and,  583,  611, 
632 


Unemployment,  Laziness  and,  581, 

611 
— ,  Qualitative  and  Quantitative, 

605 
— ,  Recent  History  of,  624,  626 

—  and  Seasonal  Trades,  630 

— ,  Statistics    of,    621,    624,    626, 

629,   630 

— ,  Technique  of,  642 
— ,  Voluntary,  581 
Unions    and    Unionism,    346,    597, 

640,  678,   708,  732 

—  and  Unemployment,  623 
United  Shoe  Machinery  Company, 

51 

Universities.  See  Sociology,  Educa- 
tion,  556,   721,   753,  792 

—  and  Socialism,  733 
University-Militarism,  815 

—  Sociology.     See  Sociology 

U.  S.  Bureau  of  Labor  Statistics, 

443 
U.   S.  Census,  357,  387,  443,  451, 

495,  621,  697 
U.  S.  Debt,  111,  465 
U.  S.  Statistical  Abstract,  110,  464 
U.  S.  Steel  Corporation,  107,  108, 

318 
Urban  Transit,   29,  352,  683,   788 

Vacant-Lot  Farming,  545 
Vacations.    See  Charity,  341 
Valuation,   44,   68,    100,    105,    185, 

188,  224,  243,  258,  302,  375, 

606 

—  and  Income,  68,  100,  105,  214, 

224,  243,  258,  302,  750,  776 
Value,  41,   44,   184,   188,   595,  606 
Vanity,  National,  382 
Veal,  376 

Vocation.     See  Occupation 
Volume   of  Production.     See  Eco- 
nomic Equilibrium,  58,  241 

—  of  Commercial  Property,  461 
Voluntary  Social  Action.     See  So- 
cial Subconsciousness 

Voter  vs.  Ultimate  Consumer.  See 
Economics  and  Politics,  151,  242, 
712,  714,  749 


INDEX 


871 


Wage-Coefficients,  446,  451 
Wage-Earning,  360 

—  Fund,   642 

— ,  Minimum,  628,  641,  679 
— ,  Starvation,  615,  628 
Wage-System,     Competitive,     596, 

602 
Wages,    192,    441,   444,    455,   507, 

524,  531,  602,  641,  674,  678, 

746 

— ,  General  Trend  of,  445,  450 
— ,  Maxima  and  Minima  of,  445 

—  and  Purchasing-Power,  446 

—  and  Salaries,  Credit  Based  on, 

123 

,  Eelative,  452 

Wages,  Statistics  of,  443 

Wages,  Who  Pays,  532,  593,  678, 

691,  747 

Wall-Builders,   Economic,   589 
Wall  Street  Journal,  667 
War  and  Commercialism,  68,  176, 

191,  355,  416,  429,  434,  523,  552, 

554,  566 

War  Industries  Board,  426 
War  and  Peace,  167,  183,  556,  559, 

561 
War  and  Prices.     See  Price,  527, 

552 

War  as  an  Educator,  183,  650 
War,  Problems  Following  the,  727 
Warehouses,  410 
Wastes    which    Escape    Statistical 

Measure.     See  Omitted  Losses 
Watered  Stock.     See  Dead  Horses, 

106,  224,  229,  257,  267,  315 


Water-Fronts,  411 

Water-Power,  24 

Watkins  on  Wealth,  459 

Watt,  James,  5,  124 

Wealth.  See  Credit,  Disparity, 
Incomes,  45,  48,  96,  336,  338, 
384,  458,  465 

— ,  Eate  of  Accumulation  of,  90, 
109,  218,  317 

— ,  Dr.  Spahr  on  Distribution  of, 
447 

— ,  Professor  Hayes  on  Distribu- 
tion of,  217,  805 

— ,  Statistics  as  to,  465 

— ,  Watkins  on,  459 

Welfare- Work,  172,  165 

Wheat,  374,  478 

Wildman,  Professor  J.  R.,  101 

Wisdom  vs.  Knowledge.  Sec 
Education,  Universities,  795 

Women  in  Industry,  387 

Women's  Clothing.  See  Fashion, 
414,  518 

Wood  on  Wages,  443 

Wool,  374,  478 

World-Economics,  361,  379 

—  Factory,  60 

—  Tendencies,  368 

X,  Quantity,  391 

Y,  Quantity,  401 

Yale    University,    284,   526,    542, 

815 
Yoakum,  Mr.  B.  F.,  313 

Zero  Interest -Eate,  306 


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